Florida 2nd DCA Decision Reaffirms Policyholder’s Right to Assign Post-Loss Benefits

When an insurer disregards a homeowner’s insurance coverage for water damage, the prospect of a protracted insurance claims dispute can be a daunting proposition.  An insured typically has a duty to take reasonable steps to mitigate further damage until repairs have been undertaken.  Execution of an assignment of benefits by the homeowner in favor of a water mitigation company can provide a fast option for remediation of water damage with no out-of-pocket costs.  However, insurance companies would prefer to take on individual homeowners than water mitigation contractors, so they routinely challenge contracts for assignment of benefits.

In the recent case of Bioscience West, Inc. v. Gulfstream Property and Casualty Insurance Company, the Florida 2nd DCA ruled in favor of a homeowner’s right to assign post-loss benefits under an insurance policy.  The insurance carrier filed for summary judgment based on a provision in the policy that prohibited a homeowner from assigning the policy without prior consent from the insurance company.  While the trial court ruled in favor of the insurer based on impermissible assignment of the policy to the water mitigation contractor, the 2nd DCA disagreed.

After the insured’s home was damaged by water, the insured hired a water mitigation company to engage in “emergency water removal and construction services.”  The company had the homeowner execute a document entitled “Assignment of Insurance Benefits.”  The form granted the company the right to direct payment of any benefits.  The insurer denied benefits based on the grounds the assignment of benefits was invalid.  The water mitigation firm filed a lawsuit for breach of contract against the insurer.  The trial court accepted the insurance company’s argument and granted summary judgment in favor of the carrier.

On appeal, the 2nd DCA initially noted that “all contractual rights are assignable unless the contract prohibits assignment, the contract involves obligations of a personal nature, or public policy dictates against assignment.  The water mitigation company contended that the language of the policy only prohibited assignment of the entire insurance policy without consent rather than a post-loss assignment of benefits.  The appellate court agreed with this analysis and reversed the trial judge’s decision.  According to the court, the policy provided: “Assignment of this policy will not be valid unless we give our written consent.”  [Emphasis in the original].  The court reasoned that the phrase “[a]ssignment of this policy” in ordinary parlance means assignment of the entire policy as opposed to assignment of post-loss benefits under the policy.

The insurer attempted to overcome this argument by contending that the assignment violated Florida’s public adjusting statute, section 626.854(16).  According to the insurance company, upholding the assignment would allow the water mitigation firm to impermissibly adjust the claim.  The court rejected this reasoning and noted the mitigation company provided emergency post-loss water removal.  However, the mitigation firm did not determine the amount due under the policy. 

The insurance company also contended that the assignment of benefits violated the statutory provision that requires the insured to have an “insurable interest” in “the things at the time of the loss.”   While the appellate court conceded that the water mitigation contractor did not have an insurable interest at the time of loss, the insured did have such an interest which could be legally transferred to the water mitigation contractor without consent of the insurer.  The court noted a long history of court decisions rejecting the proposition that homeowners must have the consent of an insurer for a post-loss assignment of benefits.  The court noted the strong public policy rationale for this principle as the time-sensitive nature of undertaking repairs following a loss which precludes waiting for the insurer to assess damages every time a loss occurs.

After you suffer water damage to your home or other forms of loss, execution of an assignment of benefits can provide a way to prevent the damage from mounting.  However, careful review of the assignment document is important to ensure you understand your rights. 

If your insurance carrier is refusing to comply with its contractual obligation, you are invited to contact our law firm to speak to an experienced Miami insurance claims attorney.  My law firm specializes in representing policyholders in claims disputes in Miami and throughout Florida. Click here to read about some of our case results.  The Law Firm of J.P. Gonzalez-Sirgo, P.A. offers free consultations and case evaluations. No Recovery, No Lawyer Fees. Call 305-461-1095 or Toll Free 1-866-71-CLAIM. 

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