The Florida Legislature recently passed HB 7065 regarding assignment of post-loss benefits (“AOB’s”). The Bill was signed by the Governor on May 23, 2019 and will take effect July 1, 2019. It will be codified as Fla. Stat. §627.7152 (2019), §627.7153 (2019) and in amendments to §627.422 (2019). While the Bill includes several sweeping changes to AOBs, this article will address the major changes that will affect carriers across the state.
Non-assignability of policies
One of the major changes for carriers will be the types of policies they can offer; assignable or not assignable. Until recently, Courts and assignees have relied on the decision in One Call Prop. Servs. v. Sec. First Ins. Co., 165 So.3d 749 (Fla. 4th DCA 2015) (as long as the insured complies with all policy conditions, a third-party assignee may recover benefits on a covered loss). In One Call, the Court essentially deferred to the legislature to address the concerns with AOBs, which they did to an extent in HB 7065.
First, HB 7065 allows for carriers to provide restrictions (either in whole or in part) on the assignability of policies under the following conditions:
(a) The same coverages must be made available to the insured or potential insured under both policies that allow assignment and those that restrict assignment.
(b) Policies restricting assignment must be offered at a lower cost than the unrestricted policy.
(c) Policies prohibiting assignment must be offered at a lower cost than any policy restricting assignment.
(d) Each restricted policy must include the following notice in 18-point uppercase and boldfaced type:
THIS POLICY DOES NOT ALLOW THE UNRESTRICTED ASSIGNMENT OF POST-LOSS INSURANCE BENEFITS. BY SELECTING THIS POLICY, YOU WAIVE YOUR RIGHT TO FREELY ASSIGN OR TRANSFER THE POST-LOSS PROPERTY INSURANCE BENEFITS AVAILABLE UNDER THIS POLICY TO A THIRD PARTY OR TO OTHERWISE FREELY ENTER INTO AN ASSIGNMENT AGREEMENT AS THE TERM IS DEFINED IN SECTION 627.7152 OF THE FLORIDA STATUTES.
(e) Carriers must notify the insured via attachment to the notice of premium at least annually of the coverage options available under this section.
(f) Rejection of an unrestricted policy must be made in writing or electronically on an approved form which must include the following language:
YOU ARE ELECTING TO PURCHASE AN INSURANCE POLICY THAT RESTRICTS THE ASSIGNMENT OF BENEFITS UNDER THE POLICY IN WHOLE OR IN PART. PLEASE READ CAREFULLY.
This provision provides a mechanism for addressing assignments at the time the policy is issued, but it will be up to each carrier to make the determination as to whether it would be a beneficial practice going forward. These new options can be included in policies issued or renewed on or after July 1, 2019.
Required Assignment Language
The Legislature also enacted several requirements for an assignment to be considered valid and enforceable.
Specifically, the assignment itself must:
- Be in writing and executed by and between the assignor and the assignee.
- Contain a provision that allows the assignor to rescind the assignment agreement without a penalty or fee by submitting a written notice of rescission signed by the assignor to the assignee within 14 days after the execution of the agreement, at least 30 days after the date work on the property is scheduled to commence if the assignee has not substantially performed, or at least 30 days after the execution of the agreement if the agreement does not contain a commencement date and the assignee has not begun substantial work on the property.
- Contain a provision requiring the assignee to provide a copy of the executed assignment agreement to the insurer within 3 business days after the date on which the assignment agreement is executed or the date on which work begins, whichever is earlier.
- Contain a written, itemized, per-unit cost estimate of the services to be performed by the assignee.
- Relate only to work to be performed by the assignee for services to protect, repair, restore, or replace a dwelling or structure or to mitigate against further damage to such property.
- Contain the following notice in 18-point uppercase and boldfaced type:
YOU ARE AGREEING TO GIVE UP CERTAIN RIGHTS YOU HAVE UNDER YOUR INSURANCE POLICY TO A THIRD PARTY, WHICH MAY RESULT IN LITIGATION AGAINST YOUR INSURER. PLEASE READ AND UNDERSTAND THIS DOCUMENT BEFORE SIGNING IT. YOU HAVE THE RIGHT TO CANCEL THIS AGREEMENT WITHOUT PENALTY WITHIN 14 DAYS AFTER THE DATE THIS AGREEMENT IS EXECUTED, AT LEAST 30 DAYS AFTER THE DATE WORK ON THE PROPERTY IS SCHEDULED TO COMMENCE IF THE ASSIGNEE HAS NOT SUBSTANTIALLY PERFORMED, OR AT LEAST 30 DAYS AFTER THE EXECUTION OF THE AGREEMENT IF THE AGREEMENT DOES NOT CONTAIN A COMMENCEMENT DATE AND THE ASSIGNEE HAS NOT BEGUN SUBSTANTIAL WORK ON THE PROPERTY. HOWEVER, YOU ARE OBLIGATED FOR PAYMENT OF ANY CONTRACTED WORK PERFORMED BEFORE THE AGREEMENT IS RESCINDED. THIS AGREEMENT DOES NOT CHANGE YOUR OBLIGATION TO PERFORM THE DUTIES REQUIRED UNDER YOUR PROPERTY INSURANCE POLICY.
Additionally, AOBs under emergency/urgent services (i.e. water mitigation, tarping, etc.) are limited to greater of $3,000 or 1 percent of the Coverage A limit under the policy.
Pre-suit Notice Requirements
The Bill also includes several pre-suit requirements on the part of the assignee and the carrier, that, in theory, should allow for attempted resolution during the claims period.
- An assignee must provide the named insured, insurer, and the assignor, if not the named insured, with a written notice of intent to initiate litigation 10 business days before filing suit. The notice must specify the damages in dispute, the amount claimed, and a pre-suit settlement demand.
- An insurer must respond in writing to the notice within 10 business days after receiving the notice by making a pre-suit settlement offer or requiring the assignee to participate in appraisal or other method of alternative dispute resolution under the policy.
It is important to note that the Bill places responsibility on the carrier to make any offers (if any are to be made) within a short timeframe of receiving notice, so it will be imperative for the carriers to put in place a process for reviewing pre-suit demands and responding accordingly. Further, the difference between pre-suit demand and settlement offer will frame the disputed amount, which will be a determining factor in a party’s right to attorney’s fees as outline below.
Right to Attorney’s Fees
Finally, the Legislature included much needed reform to the entitlement to attorney’s fees. Currently, under Florida Statute 627.428 if the assignee receives a judgment, regardless of the amount, they are entitled to attorney’s fees. Given the rise in the number of lawsuits being filed, abuse, etc., the Legislature enacted provisions in HB 7065 that finally give carriers some equity in the outcome of litigation. Specifically:
If the difference between the judgment obtained by the assignee and the pre-suit settlement offer by the carrier is:
- Less than 25 percent of the disputed amount, the insurer is entitled to an award of reasonable attorney fees.
- At least 25 percent but less than 50 percent of the disputed amount, each party pays their own fees;
- At least 50 percent of the disputed amount, the assignee is entitled to an award of reasonable attorney fees.
For example, if the pre-suit settlement demand by the assignee is $20,000.00, and the pre-suit settlement offer by the Carrier is $5,000.00, then the disputed amount would be $15,000.00.
- Under condition number (1) above, less than 25% of the disputed amount would be $3,749.99. If the assignee receives a judgment of $8,749.99 or less, the carrier would be entitled to fees.
- Under condition number (2) above, at least 25% of the disputed amount would be $3,750.00, and less than 50% of the disputed amount would be $7,499.99. Therefore, If the assignee obtains a judgement between $8,750.00 and $12,499.99, then each party pays their own fees.
- Under condition number (3) above, 50% of the disputed amount would be $7,500.00. Therefore, if the judgment is $12,500.00 or greater than the assignee would be entitled to fees.
While these provisions give carriers some equity in the rendition of fees, the Bill provides that If the carrier fails to inspect the property or provide written or oral authorization for repairs within 7 calendar days after the first notice of loss, the carrier waives its right to an award of attorney fees. Therefore, it will be important for carriers to have sound practices in place regarding work authorization and coordinating inspection within the 7-day time period to avoid waiving the right to fees.
While the Bill does not completely bar AOBs, it provides several mechanisms to help curb the use of assignments of benefits as well as limit the number of lawsuits filed. However, as discussed, the Bill creates several new duties on the part of the carrier, so these should be reviewed and implemented in the near future.
If you have any questions about this article or would like to refer a matter, please feel free to contact our first party attorneys Kathryn Oughton or Barron Martin.