While there are many issues that can derail a water damage claim following a severe storm, defective water heater, or burst pipe, the right of an insured to assign post-loss benefits to a water mitigation contractor is being hotly contested by Florida insurance companies. Insurers presume that taking on an individual homeowner in an insurance claims dispute presents less of a challenge than taking on a water mitigation company. Fortunately, a fair number of decisions have favored the right of policyholders to assign their right to proceeds under their policy to obtain services to remedy water damage. A recent decision from the Florida 2nd District Court of Appeals (2nd DCA) continues this trend affirming the ability of homeowners to use this effective approach for prompt remediation of water damage.
In Bioscience West, Inc. v. Gulfstream Property and Casualty Insurance Co., the insured experienced water damage to her home and hired a water mitigation contractor to perform “emergency water removal and construction services.” The insured executed a document with the heading “Assignment of Insurance Benefits.” The document provided as follows: “I hereby assign any and all insurance rights, benefits, and proceeds, pertaining to services …. I hereby authorize direct payment of any benefits or proceeds to my property … as consideration for any repairs ….”
The insurer denied the insurance claim based on the assertion that the damages were not covered under the policy. A breach of contract lawsuit was initiated against the insurance company. The 2nd DCA began its analysis by observing that “[a]ll contractual rights are assignable unless the contract prohibits assignment, the contract involves obligations of a personal nature, or public policy dictates against assignment.”
The insurer contended that the plain language of the insurance policy forbid the policyholder from executing an assignment without prior consent. The trial court upheld this conclusion, but this ruling was reversed by the 2nd DCA. The appellate court pointed to the following language in the anti-assignment provision of the policy: “Assignment of policy will not be valid unless we give our written consent.” [Emphasis in original].
The appellate court reasoned that the plain meaning of this language “Assignment of policy” would appear to apply to an assignment of the entire policy rather than the right to benefits or financial payment after a loss. While the insured was prohibited from transferring the entire policy to a third party without consent, the language was silent on the right to assign certain benefits or rights under the policy. The assignment provision of the contract between the insured and the water mitigation company merely assigned “insurance rights, benefits, and proceeds pertaining to service” provided to secure water mitigation services and authorizing “direct billing” of the insurer. Since the entire policy was not assigned, the language did not preclude the assignment, which was limited to post-loss proceeds.
The court also reasoned that analysis of the policy’s loss-payment provision supported this same conclusion. This provision provided in pertinent part: “[Insurer] will pay you unless some other person … is legally entitled to receive payment.” [Emphasis in original]. The court reasoned that this language of the policy anticipates paying third parties who become legally entitled to receive payment of proceeds of the policy. Further, this provision did not include the prior requirement of consent by the insurance carrier.
The insurer also claimed that the post-loss assignment of benefits violated Florida’s public adjusting statute by allowing the loss mitigation company to adjust the claim. Like other Florida appellate courts, the 2nd DCA rejected this argument because the loss mitigation company did not determine the amount due under the policy. Rather, the contractor simply provided loss mitigation services and submitted a bill for the cost.
The 2nd DCA also applied reasoning of other DCAs in rejecting the insurer’s contention that the assignment of benefits was counter to the statute prohibiting interest in insurance of property to a party without an insurable interest at the time of loss. Again, the court applied the same reasoning as other DCAs in finding this contention unpersuasive. While the contractor had no insurable interest at the time of the loss, the insured effectively assigned the policyholder’s interest in the post-loss benefits.
Finally, the court noted that Florida courts have repeatedly upheld the right of an insured to assign post-loss benefits or proceeds without a requirement that the insurer consent to such an assignment. Based on these reasons, the 2nd DCA upheld the right of a policyholder to use this efficient method of mitigating water damage. This decision promotes the strong public policy in favor of not forcing policyholders to suffer further loss because time-sensitive mitigation efforts cannot be fully implemented.
If your claim has been denied for water damage to your home, 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.