In previous blog posts we have noted the ongoing campaign by insurance companies to eliminate a policyholder’s right to assign post-loss insurance benefits to a damage remediation contractor. Florida insurance policies often include provisions that limit an insured’s ability to assign rights under a homeowner’s insurance policy. However, Florida courts have carved out a clear exception to the general rule that homeowner’s policies may include a provision denying or limiting the right of an insured to transfer the contract or the insured’s rights and benefits under the agreement. A recent decision by the Florida 1st DCA reaffirmed that an insured has the right to assign a post-loss claim or right to benefits regardless of the existence of an anti-assignment provision in a homeowner’s policy.
In United Water Restoration Group, Inc. v. State Farm Florida Ins. Co., the insurer sought dismissal of a complaint filed by a water remediation company under an assignment of rights contract with the named policyholder. The home of the insured was damaged by water in 2012. The insured retained the plaintiff to perform emergency damage remediation and executed an agreement that assigned, “any and all rights, benefits, and proceeds under the State Farm policy to contractor.” State Farm refused to pay the invoice submitted by the plaintiff in the amount of $2,744.64. The water remediation company sued for breach of contract under the policy and pursuant to the assignment agreement.
The insurance company sought dismissal of the complaint by tweaking the conventional argument brought by insurers under these circumstances. The insurer contended the damage was caused by “repeated leakage and seepage, mold, rot, and decay, which are all specifically excluded under the policy.” The insurer posited that the policyholder retained the duty to satisfy the conditions of coverage.
The general rule is that an insured has a right to assign a post-loss right to benefits or money irrespective of the assignment provision in an insurance contract, but the insurer argued that the relevant issue was a question of coverage. In other words, the insurer argued that a post-loss assignment of benefits was not at issue because the claim was not covered under the policy. If the insurer has no right to recover, the insured had no post-loss right to benefits to assign to the water remediation company. The trial court ruled that the issue of coverage must be litigated by the insured. United Water then appealed to the 1st DCA.
The 1st DCA rejected the prior rulings on two separate grounds. The first grounds for refusing to dismiss the lawsuit was that the issue of coverage was not raised within the “four corners” of the complaint filed by the insured. A motion to dismiss must be limited strictly to the allegations in the complaint without regard to affirmative defenses or questions of the sufficiency of evidence to support the complaint.
The second and more important basis for the court’s decision to side with the policyholder is that the lower court’s ruling would run afoul of the long-established precedent in Florida that authorizes an insured to assign a post-loss right to insurance benefits or money. The court concluded that based on this often and recently affirmed public policy in Florida, the position that only the insured could pursue a lawsuit would effectively negate the ability of an insured to assign a post-loss right to benefits or funds.
The court recognized that the insurer’s position constituted a “backdoor” attempt to eliminate a policyholder’s right to obtain emergency damage mitigation services by assigning the insured’s right to recovery after a loss. This valuable relationship allows homeowner’s to prevent further damage by facilitating immediate repairs without a demand for up-front payment. If loss remediation companies had to rely on policyholders to bring a lawsuit for the contractor to get paid anytime the insurer asserted a marginal dispute regarding coverage, contractors could no longer take the risk of providing this approach to deferred payment for services. Insurance companies would rather deal with individual homeowner’s than a loss mitigation company during a dispute. This legal strategy is yet another attempt to eliminate an insured’s right to a post-loss assignment of rights despite this right existing in Florida for more than a hundred years.
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].