Florida property insurers won a pair of recent appeals court decisions that found the companies didn’t have to pay policy benefits to third-party contractors, offering some good news for an industry that suffered $1.5 billion in losses last year.
The Third District Court of Appeal ruled Oct. 13 that Heritage Property and Casualty Insurance Co. was not bound to pay a contractor, Union Restoration Inc., in a breach-of-contract dispute involving home repairs for water damage.
“Finding no error in the trial court’s determination that the assignment attached to the amended complaint is invalid because it was not signed by one of the insureds and the mortgagee, as required by the underlying property insurance policy, we affirm,” the Third District’s opinion stated.
The Fourth District Court of Appeal issued a similar opinion this month in a case involving Geovera Specialty Insurance Co. The court found that a lack of adequate signatures invalidated an assignment-of-benefits (AOB) contract with a remediation services company.
Such AOB contracts, in which homeowners sign over insurance benefits to a third party in return for timely repairs, have been criticized over abusive practices by bad actors and increased litigation costs for insurers. The Florida legislature passed an AOB reform bill in 2019 to curb those abuses.
“Hopefully, these recent court decisions will dissuade some of these restoration contractors and other contractors from continually filing suits that many believe are frivolous.” Kyle Ulrich, president and CEO of the Florida Association of Insurance Agents, told the Florida Record.
The 2019 law didn’t bar assignment-of-benefits contracts outright, according to Ulrich, but it did attempt to make sure there were firm rules about what constitutes a valid assignment.
“With some of the recent court decisions, it appears as though courts are strictly interpreting changes in the 2019 law to show that there are those statutory requirements to make an assignment valid,” he said.
The financial health of Florida’s property insurers continues to deteriorate, according to Ulrich, who said most companies are taking heavy losses.
“There doesn’t seem to be any signs of rate stabilization whatsoever,” he said.
A bill was signed into law this year aimed to limit courts’ ability to force insurers to pay attorney fees in insurance litigation. That will help keep insurers’ litigation costs under control and reduce upward pressures on rates, supporters said.
But those reforms may take up to three years for companies to see a drop in litigation and then pass along savings in the form of rate stabilization, Ulrich said.