‘AOB’ insurance fight goes to Supreme Court
Members of the Consumer Protection Coalition and the Florida Association of Insurance Agents march from downtown Tallahassee to the state Capitol to raise awareness about Assignment of Benefits abuse and its negative impact on consumers. Photo: Florida Chamber of Commerce.


A fierce debate about the insurance practice known as “assignment of benefits” could play out at the Florida Supreme Court.

Pointing to conflicting opinions in the state’s appellate courts, attorneys last week filed notices asking the Supreme Court to take up a St. Lucie County case about a water-damage insurance claim. In a somewhat-unusual circumstance, attorneys representing parties on both sides — an insurer and a restoration company — want the Supreme Court to weigh in.

Assignment of benefits, or AOB as it is widely known, has been one of the most-controversial insurance issues in the Capitol in recent years. 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 because of increased claims for water damage to homes, particularly in South Florida. Insurers argue that the process has become riddled with fraud and litigation, driving up insurance rates. Contractors and trial attorneys contend that assigning benefits helps homeowners hire contractors quickly to repair damage and forces insurers to properly pay claims.

A decision last month by the 4th District Court of Appeal in the St. Lucie County case was a victory for the insurance industry because it upheld a restriction on assignment of benefits. But that decision conflicted with a ruling last year by the 5th District Court of Appeal.

It is too early to know whether the Supreme Court will take up the dispute. But one of the common rationales for the Supreme Court to hear cases is to resolve conflicts in lower courts.

The St. Lucie County case involves a breach-of-contract lawsuit filed by the firm Restoration 1 of Port St. Lucie against Ark Royal Insurance Co. Policyholders John and Liza Squitieri sustained water damage to their home, and Liza Squitieri contracted with Restoration 1 of Port St. Lucie to do cleanup work and assigned the benefits to the firm, according to the appeals-court ruling.

Ark Royal, however, refused to pay the full amount requested by the restoration firm, pointing to an insurance contract that required approval from the husband, wife and the Squitieris’ mortgage company, PNC Bank, for benefits to be assigned to the contractor. Restoration 1 sued the insurer for breach of contract but lost in circuit court and the 4th District Court of Appeal.

A panel of the appeals court upheld the provision requiring the mortgage company and the couple to approve the assignment of benefits, saying “it is impossible to brand the contested provision as superfluous — as both of the insureds (the husband and wife), as well as the mortgagee (PNC), have a vested interest that a reputable, legitimate third-party contractor perform repairs on the home.”

“The contract here does not prohibit assignment — it imposes a condition, requiring the approval of all insureds and the mortgagee,” the ruling said.

But attorneys for Royal Ark and Restoration 1 filed two notices last week at the Supreme Court, with both sides pointing to a “direct conflict” with a decision by the 5th District Court of Appeal.

The decision by the 5th District Court of Appeal in December dealt with somewhat-different circumstances but also focused on requiring approval of mortgage companies and all people insured in the policies before benefits could be assigned.

Security First Insurance Co. took the case to the 5th District Court of Appeal after the Florida Office of Insurance Regulation rejected a company proposal to add such AOB restrictions to policies. A panel of the appeals court upheld the position of the Office of Insurance Regulation and cited a 1917 Florida Supreme Court decision as part of the basis.

The 4th District Court of Appeal also cited the 1917 case in its St. Lucie County decision — but came to a different conclusion about how the century-old ruling should apply.

Amid heavy lobbying in recent years, state lawmakers have considered a series of proposals that could change the assignment-of-benefits process. But the proposals have repeatedly died, with the House and Senate not reaching agreement.

While the appellate courts disagreed in their legal rulings, both noted that other issues in the assignment-of-benefits debate are better left to the Legislature.

“Finally, with respect to the public policy concerns of both parties, they are best addressed by the Legislature, not the courts,” the 4th District Court of Appeal ruling concluded.

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