April 5, 2020

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April 03, 2020

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New Statutory Framework Confronts Florida’s AOB Crisis

A new law represents a major step forward to remedy Florida’s assignment of benefits (“AOB”) crisis, which Florida Governor Ron DeSantis has described as a “racket” in recent years. On Thursday, May 23, 2019, Governor DeSantis signed House Bill 7065, which addresses the abuse of post-loss AOBs for residential and commercial property insurance claims, by (among other things):

  • Defining “assignment agreement” and establishing requirements for the execution, validity, and effect of such an agreement;

  • Transferring certain pre-suit duties under the policy to the assignee and shifting the burden to the assignee to prove that any failure to carry out such duties has not prejudiced the insurer’s ability to perform under the policy;

  • Requiring the assignee to give the insurer notice of the assignee’s intent to file suit and establishing requirements for the notice;

  • Requiring the assignee to comply with standards approved by the American National Standards Institute;

  • Limiting an assignee’s recovery if the AOB is executed in an emergency situation;

  • Limiting an assignee’s ability to recover certain costs from the insured;

  • Setting the formula that will determine which party, if any, receives an award of attorneys’ fees should litigation related to an AOB result in a judgment;

  • Allowing an insurer to prohibit AOBs in certain instances, provided that the insurer gives specific notice.

A key provision of House Bill 7065 requires an assignee to give ten business days’ written notice prior to filing suit. This notice must specify the damages in dispute, the amount claimed, and the pre-suit settlement demand, and must include an itemized, detailed written invoice or estimate of the work performed or to be performed. Requiring the repair or remediation company to provide supporting documentation prior to filing suit may put the insurer in a better position to evaluate the claim.

In addition, if the parties fail to settle and subsequent litigation results in a judgment, the Bill provides a means of recovering attorneys’ fees. Insurers in Florida now have the opportunity to recover their attorneys’ fees in certain situations. Specifically, the Bill allows an award of fees based on the difference between the judgment and the amount offered during settlement negotiations. To accomplish this, the Bill defines the difference between the insurer’s pre-suit offer and the assignee’s pre-suit demand as the “disputed amount.”

This provision especially benefits the insurer in cases where the difference between the judgment and the settlement offer is less than 25% of the disputed amount. In that case, the insurer is entitled to 100% of its attorneys’ fees. In cases where the difference between the judgment and the settlement offer is at least 25% but less than 50% of the disputed amount, neither party is entitled to fees.

Another key provision of the Bill creates Florida Statute Section 627.7153, which allows the insurer to issue a policy prohibiting AOBs if:

  • The insurer offers the same coverage under a policy that does not restrict the right to assignment;

  • The restricted policy is available at a lower cost than the unrestricted policy; and

  • The policy prohibiting assignment in whole is available at a lower cost than the policy prohibiting assignment in part.

House Bill 7065 becomes effective on July 1, 2019, and with its passage, there is some hope that abuse surrounding AOB claims will be curtailed. Nevertheless, there have been claims that the reforms treat contractors unfairly. We can certainly anticipate litigation by contractors taking issue with the meaning, scope and equities of the new law. We will monitor and weigh in on these challenges in the months ahead.

Copyright © 2020 Robinson & Cole LLP. All rights reserved.

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About this Author

Gabrielle Mercadante Insurance & Business Attorney
Associate

Gabrielle Mercadante defends insurance, personal injury, and commercial litigation matters on behalf of clients, including insurance companies, airlines, general contractors, and large corporations. She is a member of the firm’s Insurance + Reinsurance Group and is fluent in Spanish.

Insurance Litigation

Gabrielle represents insurance companies in claims arising out of coverage issues. She counsels carriers in all stages of disputes, from providing advice on coverage obligations to representing them at mediation and trial. Specifically, Gabrielle has...

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