With a legislative battle brewing again about the issue, an appeals court has ruled against a property insurer’s effort to place restrictions on a controversial practice known as “assignment of benefits.”
The 5th District Court of Appeal, in an eight-page ruling Friday, upheld a decision by the state Office of Insurance Regulation to reject restrictions proposed by Security First Insurance Co.
The ruling was another blow to the insurance industry, which has blamed assignment of benefits for driving up property-insurance premiums — but has been unable to persuade lawmakers to make changes to the longstanding practice.
A three-judge panel of the appeals court pointed to past legal rulings about assignment of benefits and said it was up to the Legislature to decide whether to make changes.
“Review of the case law relating to the subject of the assignability of post-loss benefits reveals that Florida courts have been previously invited to consider these public policy arguments; however, the district courts have refused these invitations, concluding that such considerations are for the Legislature to address. … We agree that the asserted public policy concerns are best addressed by the Legislature,” said the ruling, written by Judge George Paulk and joined by Chief Judge Jay Cohen and Judge Wendy Berger.
In assignment of benefits, homeowners in need of repairs sign over benefits to contractors, who ultimately pursue payments from insurance companies. While assignment of benefits is nothing new, it has become high-profile in recent years because of increased claims for water damage to homes, particularly in South Florida.
The insurance industry contends that the practice has become riddled with fraud and has increased litigation, driving up costs. But plaintiffs’ attorneys and contractors argue that assignment of benefits helps homeowners hire contractors quickly to repair damage and forces insurers to properly pay claims. Plaintiffs’ lawyers and contractors also contend that assignment of benefits can help prevent consumers from having to fend for themselves in insurance disputes.
In the case decided Friday, Security First sought to add restrictions to policies that, in part, would have required assignment of benefits to have written consent from policyholders and their mortgage lenders. The Office of Insurance Regulation and a hearing officer rejected the proposal, with the hearing officer concluding that a “restriction on the right of a policyholder to freely assign his or her post-loss benefits is prohibited under Florida law,” according to the appeals court.
The ruling came as a lobbying battle is building about the assignment-of-benefits issue for the 2018 Legislative Session, which starts Jan. 9.
A House committee last month approved a bill (HB 7015) that would make changes in assignment of benefits, including taking steps to curb litigation and impose new reporting requirements. A Senate bill (SB 62) has not been heard in committees.
The assignment-of-benefits debate, however, has moved beyond residential property-insurance policies and has become an issue with claims for automobile windshield damage. The Senate Banking and Insurance Committee on Tuesday is expected to take up a bill (SB 396), filed by Sen. Dorothy Hukill, a Port Orange Republican, that could lead to required inspections before damaged windshields get repaired or replaced.