The following is an opinion article written by former Justice Ken Bell (pictured). The views expressed within the article are not necessarily reflective of those of Insurance Business.
Florida’s intermediate appellate courts have split on whether requiring an assignment of post-loss claim benefits (AOB) to have the written consent of all insureds and named mortgagees is enforceable under Florida common law. I believe the Florida Supreme Court will enforce that condition and defer to the Florida Legislature whether to limit or preclude such a condition on post-loss AOBs.
The court should enforce an other insured’s consent to assignment clause
Distinct from the general assignment clause requiring the insurer’s consent to an assignment of the policy, a Florida insurer’s policy requires AOBs to have the consent of other insureds. It states:
18. Assignment of Claim Benefits. No assignment of claim benefits, regardless of whether made before loss or after loss, shall be valid without the written consent of all “insureds”, all additional insureds and all mortgagee(s) named in this policy.
Three Florida district courts of appeal have addressed enforcement of this clause. In Biologic, Inc. a/a/0 Elizabeth Morgan v. ASI Preferred Ins. Corp., 238 So. 3d 769 (Fla. 2D DCA 2017), the 2d DCA enforced it without explanation. The 4th DCA reached the same result on September 5, 2018, in Restoration 1 of Port St. Lucie, a/a/o Liza Squitieri v. Ark Royal Ins. Co., (2018 WL 4211750) and then certified conflict with an earlier 5th DCA decision.
In Security First Ins. Company v. Florida Office of Insurance Regulation, the 5th DCA concluded the OIR “properly disapproved of Security First’s request to amend its policy language to restrict the ability of policy holders to assign post-loss benefits.”
The Ark Royal decision articulates four ways the Security First decision erred. First, Security First fails to differentiate the provision requiring the consent of other insureds to an assignment of claim benefits from the general assignment clause requiring the insurer’s consent to assignments of the policy. Settled common law holds that the insurer’s consent to assignment provision will not be enforced against a post-loss AOB. As Ark Royal notes “a significant difference exists between requiring the insurer’s consent and requiring the consent of the insureds and mortgagees.” The most significant difference is that, unlike the insurer, other insureds have a vested interest in the claim benefit being assigned.
Second, Security First misstates the common law rule as precluding any condition on assignment of post-loss claim benefits. Ark Royal correctly observes that the common law rule has only been applied to not enforce the general insurer’s consent to assignment clause to an assignment after loss. The rule of law has never been applied to a condition requiring the assignment have the consent of other insureds whose vested interest may be affected by the assignment.
Third, had Security First considered the rationale for that rule, it would have recognized the rationale does not apply to an AOB provision requiring the consent of other insureds.
Fourth, with no law precluding a condition on post-loss AOBs having the consent of other insureds, the judiciary must leave any public policy decision not to preclude such a provision to the Florida Legislature.
In my opinion, the Florida Supreme Court should affirm the Ark Royal decision. The common law rule refusing to enforce the general “insurer’s consent” to assignment provision against a post-loss assignment of benefits does not apply to an “other insureds consent” provision like Paragraph 18.
The public policy issue
Florida’s OIR has documented the rate increases due to restoration AOBs. The abuse of AOBs has also caused homeowners: (1) to be denied coverage based on serial claims by the contractor they were not aware of; (2) to suffer the expense of forced placed coverage; and, (3) to have mechanic liens placed on their homes. For example, homes in one subdivision were damaged by a hailstorm. The homeowners signed an AOB with a roofer who collected the insurance benefits but did not pay the roofer who did the actual work. The homeowners were surprised when the unpaid roofer filed mechanic liens and foreclosures to collect the money owed.
These AOB problems seem unnecessary. Restoration contractors have relied on direct payment authorizations to obtain payment from the insurer and have lien rights with the guarantee of attorney’s fee. Any hurdles they face without an AOB pales in comparison to the harm caused.
In conclusion, the Florida Supreme Court should decide in 2019 not to extend the settled common law to the AOB context and, instead, leave to the Florida Legislature the task of addressing the complex public policy issues surrounding AOBs in the restoration context.
Former Justice Ken Bell is a shareholder of Gunster whose practice is focused on civil appeals and trial support. Ken currently co-chairs Gunster’s firmwide Appellate practice. Ken is a former Florida Supreme Court Justice, serving from 2002-2008. Prior to serving on Florida’s highest court, Ken was as a circuit judge in Florida’s First Judicial Circuit from 1991-2002, where he became the youngest Circuit Judge in the history of the First Circuit.