Florida insurance carriers have recently waged a war against the assignment of benefits by policyholders following a loss. Policyholders who are aware of the recent attempts by Florida insurers to prevent policyholders from taking advantage of this claims tool might assume that this is a very new type of arrangement. However, Florida law has recognized the right of policyholders to assign their proceeds or legal rights in the wake of a loss to obtain emergency loss mitigation services for many decades. Because the insurance industry has engaged in a widespread campaign of misinformation about this claims alternative, this two-part blog post provides information about common fallacies being promoted by the insurance industry regarding post-loss assignment of benefits.
Fallacy #1: The use of assignment of benefits provisions constitutes a novel practice without a sufficient track record to determine its impact on policyholders.
The notion of assignment of benefits is a long-standing principle for payment of services that is firmly based on business practices and Florida law reaching back approximately a hundred years. This type of arrangement has long been established in the area of automobile and health care claims to permit policyholders to secure services without the need to pay in advance. In the context of property damage, the Florida Supreme Court in West Florida Grocery v. Teutonia Fire Insur. Co. in 1917 observed: “[I]t is a well-settled rule that the provision in a policy relative to the consent of the insurer to the transfer of an interest therein does not apply to an assignment after loss.”
Fallacy #2: When contractors are permitted to execute assignment of benefits agreements with homeowners, damage mitigation service providers submit fraudulent overinflated invoices.
The vast majority of contractors who provide loss mitigation services perform high quality work at a reasonable price. However, there will always be some contractors who inflate their bills and overcharge for their services. Whether the contractor executes an assignment of benefits agreement with a policyholder has absolutely no impact on whether the contractor will inflate billings. The only difference involves whether the policyholder or insurance company will be involved in disputing overpriced services. If an insurer wants to dispute some aspect of the billing by a contractor, the insurer will take this matter up directly with the contractor.
Fallacy #3: Execution of an assignment of benefits agreement allows contractors to evade requirements imposed by insurance policies.
Although the right to receive funds or benefits from a post-loss claim will be transferred to the contractor, the duties owed by an insured under a policy do not change. If an insured does not comply with the conditions for payment of a policy, such as providing notice of the loss or taking steps to mitigate further damage, the insurer might still deny payment of proceeds under the policy to the contractor. As the Florida 5th Circuit Court of Appeals recognized in Shaw v. State Farm, “Assignment of a right to payment under a contract does not eliminate the duty of compliance with contract conditions.”
Fallacy #4: The assignment of benefits relationship empowers loss mitigation contractors to pursue rights that would not be available to policyholders.
Whether the homeowner or a contractor owns the right to receive payment under a policy, the rights granted to a loss mitigation company are not broader than those granted to the policyholder. The existing right to receive payment for the work already performed or to be performed by a contractor following a loss is simply shifted to the contractor. The insurance company can still raise all legal and equitable defenses against the contractor that the carrier could have raised against the policyholder to justify denial of the claim.
Click here to read Part 2 of our two-part blog "Debunking Fallacies Associated with the Assignment of Benefits to Loss Mitigation Firms"
You can reach Miami Insurance Claims Lawyer J.P. Gonzalez-Sirgo by dialing his direct number at (786) 272-5841, calling the main office at (305) 461-1095, or Toll Free at 1 (866) 71-CLAIM or email Attorney Gonzalez-Sirgo directly at [email protected].