Florida Supreme Court Dismisses Long-Awaited Case on AOB Policy Language

The Florida Supreme Court has reversed course and decided not to hear a controversial case regarding the validity of certain language around assignment of benefit agreements, instead ruling that a law passed by the Florida Legislature this session, which took effect July 1, addresses the matter.

In a 4-3 decision last month, the court dismissed the case of Restoration 1 of Port St. Lucie v. Ark Royal Insurance, which the court accepted jurisdiction over in December in response to the plaintiff’s appeal of the Florida’s Fourth District Court of Appeal decision that an insurer’s anti-assignment provision was not prohibited.

The court said in its July 29 decision the conflict issue involves the validity of “a restriction” in an insurance policy “that requires the consent of all the insureds and the mortgagee before any assignment [of post-loss benefits].” And that after the court accepted jurisdiction, the law relating to insurance assignment agreements was passed. The new law allows insurers to restrict or prohibit the use of assignment agreements in their policies if several conditions are met and upon approval from the Florida Office of Insurance Regulation (OIR).

“Because we conclude that the new legislation addresses on a going-forward basis the issue before us, we exercise our discretion to discharge jurisdiction. Accordingly, we hereby discharge jurisdiction and dismiss this review proceeding,” the court stated. “Any and all pending motions are hereby denied as moot. No motion for rehearing or reinstatement will be entertained by the Court.”

The case before the court stemmed from a homeowners insurance incident where a husband and wife contracted with a water restoration company to fix water damage to their insured home. The home also had a mortgage. The wife, without the consent of her husband or the mortgagee, also agreed to “an assignment of benefits agreement assigning ‘any and all insurance rights, benefits, proceeds and any cause of action under any applicable insurance policies'” to the water restoration company.

However, the policy at issue contained a condition that “[n]o assignment of claim benefits, regardless of whether made before a loss or after a loss, shall be valid without the written consent of all ‘insureds,’ all additional insureds, and all mortgagee(s) named in the policy.”

The insurer successfully argued to the Florida Fourth DCA last September that a homeowners insurance policy may contain a provision requiring the consent of other insureds and the mortgagees before a valid assignment of benefits may be made.

Restoration 1 appealed the decision, and on Dec. 27, 2018, the Florida Supreme Court accepted jurisdiction in the case, certifying conflict between the Fourth District Court of Appeal and the Fifth District Court of Appeal, which ruled in 2017 in the case of Security First Insurance Co. vs. Florida Office of Insurance Regulation (OIR) that similar policy language was prohibited.

In a brief filed for the case to be heard by the Florida Supreme Court, attorneys for Restoration 1 argued the Fourth DCA was incorrect in allowing insurers to require the consent of all insureds and mortgagees to assign benefits under a homeowners insurance policy post-loss. Ark Royal responded in its initial brief to the Florida Supreme Court that requiring the consent of other insureds is not “superfluous” because other insureds and named mortgagees have vested interests in the benefits being assigned.Florida regulatory attorney Andrew Marcus with Holland & Knight in Tallahassee said the decision to dismiss the case by the Florida Supreme Court leaves a number of issues, and prior cases, unresolved.

“The [court’s] 2019 decision was not retroactive, and there are pending assignment of benefits cases throughout the state, many of which are based on the practices of unscrupulous contractors,” Marcus said. “A conflict also remains among jurisdictions as to whether it is a restriction on a policy to require a post-loss assignment of benefits be conditioned upon the consent of parties with valid, vested interests in the property, like mortgagees.”

APCIA Regional Manager Logan McFaddin said by discharging jurisdiction, the Florida Supreme Court “declined to squarely address whether an insurer may continue to require the consent of all insureds to a post-loss assignment of benefits.”

OIR declined to comment on Florida Supreme Court’s decision to dismiss the Restoration 1 of Port St. Lucie vs. Ark Royal Insurance Co. case, but said it does not affect the Security First Insurance Co. vs. Florida Office of Insurance Regulation (OIR) case. It released a memo in June detailing what insurers need to know about the new AOB law and standards for policies to restrict an assignment.