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Florida's New Law on Assignment of BenefitsMatthew H. Luttinger and Bruce E. Loren | May 01 2019

Florida Governor Ron Desantis recently announced the he would sign legislation to reform the assignment of benefits ("AOB") statute, establishing several new sections of the statute. This new reform would go into effect on July 1, 2019. Here, we highlight some of the most notable changes and additions.

An AOB is typically where an owner assigns its right to a contractor to file for, and receive insurance benefits in exchange for the contractor performing all the necessary repairs. This allows the insurance company to negotiate and pay the contractor for the claim directly, rather than the policy holder having to pay their contractor first and then file a claim against the insurance company.

No more one-way attorneys’ fees

  • The prior statute provides for attorneys’ fees to the assignee-contractor, even if it collected a dollar.
  • In contrast, the new AOB statute requires assignee-contractors to obtain a judgment of an amount at least 50% greater than the insurance company’s pre-suit settlement offer to obtain an award of attorneys’ fees. Assignee-contractors who fail to obtain a judgment at least 25% greater are required to pay the insurance company’s attorneys’ fees.
  • However, the insurance company must inspect the property within 7 business days after the first notice of loss or it waives its right to attorneys’ fees (subject to certain exceptions).

Policies will be able to restrict AOBs

  • Insurance companies will be able to offer policies that restrict in whole or in part the ability of policy holders to enter into AOBs.
  • However, the insurance company must also offer a policy that provides coverage without such restrictions and the insurance company must charge a lower premium for policies that contain such restrictions.

Assignee-contractors must submit to examinations under oath

  • Before an assignee-contractor is permitted to file suit against an insurance company, the contractor will now have to submit to examinations under oath or provide recorded statements that are reasonably necessary regarding the services provided, the cost of services, and the AOB. Previously, these duties were only required by the policy holder.

Pre-suit notice, negotiation, and AOB requirements

  • At least 10 business days prior to filing suit against the insurance company, the assignee-contractor must provide the policy holder and the insurance company with a detailed invoice or estimate and a notice of intent to initiate litigation that specifies the damages in dispute, the amount claimed, and the assignee-contractor’s pre-suit demand.
  • The insurance company must respond to the notice within 10 business days by either making a pre-suit settlement offer or requiring the assignee-contractor to participate in appraisal or another method of alternative dispute resolution under the policy.
  • AOBs now must include, among other things, an itemized per-unit cost estimate of the services to be performed and a provision requiring the assignee-contractor to provide a copy of the executed AOB to the insurance company within the earlier of 3 business days after the agreement is executed or when the work begins.

Limitation on AOBs in urgent or emergency circumstances

  • If a policy holder acts under an urgent or emergency circumstance to protect property from damages and executes an AOB to protect, repair, restore or replace property or to mitigate against further damage to property, an assignee-contractor may not receive an assignment of post-loss benefits under a residential property insurance policy in excess of the greater of $3,000 or 1 percent of the Coverage A limit under such policy.
  • An "urgent or emergency circumstance" means a situation in which a loss to property, if not addressed immediately, will result in additional damage until measures are completed to prevent such damage.

Waiver of Liens against Owners

  • Acceptance of an AOB is a waiver by the assignee-contractor and its subcontractors of claims against an owner arising from the agreement.

What does this mean for contractors and subcontractors?

  • This legislation is intended to reduce the influx of AOB litigation, and potentially frivolous claims. Contractors and subcontractors will be forced to closely evaluate the merits of their claim prior to filing suit against the insurance company, as the chances of prevailing against the insurance company will become more risky, costly, and time consuming upon the passage of this new legislation.
  • Due to the foregoing, contractors and subcontractors must now think twice before agreeing to an AOB and may want to opt for collecting payment directly from the owner.

Bruce E. Loren and Matthew H. Luttinger of Loren & Kean Law are based in Palm Beach Gardens and Ft. Lauderdale. Loren & Kean Law is a boutique law firm concentrating in construction law, employment law, and complex commercial litigation. Mr. Loren has achieved the title of "Certified in Construction Law" by the Florida Bar, exemplifying the Bar’s recognition of this expertise. The firm’s construction clients include owners/developers, general contractors, specialty contractors in every trade, suppliers and professional architects and engineers. Mr. Luttinger and Mr. Loren can be reached at mluttinger@lorenkeanlaw.com or bloren@lorenkeanlaw.com or 561-615-5701.