In a recent win for insurers, the Florida legislature passed assignment of benefits reform legislation, which will have a significant impact on property insurers and policyholders alike. HB 7065 is expected to be signed into law by Gov. Ron DeSantis with an effective date of July 1, 2019.
The legislation is expected to diminish the frequency of lawsuits brought by assignees against insurance companies, in turn lowering legal fees for insurers and eventually lowering insurance prices for consumers. Advocates of the bill believe that the significant increase in assignment of benefit lawsuits in recent years has directly contributed to the rise in insurance costs in Florida.
Considering the substantial number of changes resulting from the legislation, Florida claims professionals should expect a curb in the practice of assignment of benefits by policyholders, and, consequently, a reduction in lawsuits filed against insurers by the assignees.
The legislation amends Florida Statute Section 627.422, which governs assignments of post-loss benefits under property insurance policies, and creates Sections 627.7152 and 627.7153, which provide detailed terms and requirements related to the assignment agreements. Section 627.7153 also provides for alternative policies that restrict assignments, subject to certain conditions.
Perhaps the most significant change is the modification of the attorney’s-fee structure found in the current law, which has been blamed for driving assignment of benefits abuse. The current statute requires the insurer to pay attorney’s fees if the insurer is found to have underpaid the claim by any amount, and does not give the insurer the opportunity to recover its attorney’s fees—a seemingly unfair arrangement for insurers.
The legislation amends the Florida attorney’s-fee statute by creating a prevailing party fee-shifting statute that gives the prevailing party in assignment of benefit cases (i.e., either the insurer or the assignee) the right to collect attorney’s fees and costs (see Fla. Stat. Section 627.7152(10)). Notably, the insurer waives the right to collect attorney’s fees under the statute if the insurer fails to inspect the property or provide written or oral authorization for repairs within seven calendar days after the first notice of loss, except under certain circumstances, such as when the governor has declared a state of emergency or when the insured does not, or is unable to, allow an inspection after a request by the insurer (see Fla. Stat. Section 627.7152(10)(b)).
Additionally, the new law requires the assignee to give an insurer and the homeowner/original policyholder written notice of at least 10 business days before filing suit under the policy (see Fla. Stat. Section 627.7152(9)). The assignee also must provide the insurer with a detailed written invoice or estimate of services, and a notice of intent to initiate litigation that specifies the damages in dispute, the amount claimed, and the pre-suit settlement demand.
The insurer is required to respond to the notice within 10 business days after receiving the notice by either making a pre-suit settlement offer or requiring the assignee to participate in appraisal or another method of alternative dispute resolution under the policy. This pre-suit notice requirement will give the insurer more information about the claim before a suit is filed and allow the insurer to investigate the dispute in the hopes that it may potentially be resolved before litigation ensues.
Further, Florida Statute Section 627.7152(3)(d) requires that assignees provide a copy of an executed assignment agreement to the insurer within three days after the agreement is executed, or when the work begins (whichever is earlier). This provision essentially mandates that the insurer is put on notice that the policy benefits have been assigned almost immediately after the agreement is entered into between the policyholder and the assignee, and gives the insurer the opportunity to object to the agreement if it feels that it is not valid and enforceable for any reason.
Finally, Florida Statute Section 627.7153 allows insurance companies to offer a property insurance policy that restricts, in whole or in part, an insured’s right to execute an assignment agreement, so long as certain conditions are met. Notably, one of these conditions is that these restricted policies must be available at a lower cost to the insured than the unrestricted policies. If the insured chooses a restricted policy, she must reject a fully assignable policy in writing or electronically.
Thus, the statute seeks to ensure that the policyholder is aware of the options available with respect to assignable policies and has made an educated choice in selecting a policy. The lower cost of the restricted policies will likely incentivize policyholders to purchase the restricted policies as opposed to the assignable policies, and, in turn, the number of suits brought by assignees against insurance companies will likely decrease.