Case Law Update
December 7, 2017
Atkinson, P.A. is writing today to alert you to a very recent case decided by Florida’s 5th District Court of Appeal, which may impact your claims handling practices in the State of Florida. On December 1, 2017, the 5th DCA decided Security First Insurance Co. v. Florida Office of Insurance Regulation, upholding a decision by the state Office of Insurance Regulation (“OIR”) to reject Security First Insurance Co.’s (“Security First”) request to amend its policy language to restrict the ability of policyholders to assign post-loss benefits.
Security First requested OIR’s approval to add endorsements to the conditions section of its insurance policies. The endorsement proposed the inclusion of new language, titled “Assignment of Benefits” (AOB); the language restricted the ability of policyholders to assign post-loss benefits absent the consent of all insureds, all additional insureds, and all mortgagee named in their policies. The proposed endorsement read as follows:
28. Assignment of Benefits:
a. For any assignment of benefits after a loss:
(1) You must disclose the assignment to us prior to the payment of any claim; and
(2) You must comply with all of section I – Conditions,
4. Your Duties After Loss. We have no duty to provide coverage under this policy if you fail to comply with these duties.
b. No assignment of benefits, regardless of whether made before loss or after loss, shall be valid without the written consent of all “insureds”, all additional “insureds”, and all mortgagee(s) named in this policy.
c. If we deny your claim, that denial will be applied to a valid claim of any assignee(s) and/or any other third parties contracted by you to services rendered to you to repair or replace damaged property.
d. We will not be responsible for payment to any assignee or third parties for payments for services rendered that are not covered property losses under this policy.
OIR issued a letter rejecting the proposed endorsement. Security First requested administrative review of OIR’s decision. The Hearing Officer upheld OIR’s decision, concluding that it was not clearly erroneous because a “restriction on the right of a policy holder to freely assign his or her post-loss benefits is prohibited under Florida law.”
On appeal, a three-judge panel affirmed the decision by the state OIR based on a previous decision, One Call Prop. Servs. Inc. v. Sec. First Ins., 165 So. 3d 749, 753 (Fla. 4th DCA 2015), in which the Fourth District held that while public policy concerns exist regarding the assignment of benefits practice being riddled with fraud and driving up litigation costs, the Court was “not in a position… to evaluate these public policy arguments.” Holding that there was insufficient evidence to decide whether assignment of benefits are significantly increasing the risk to insurers. The Court stated that even if “studies show that these assignments are inviting fraud and abuse, then the legislature is in the best position to investigate and undertake comprehensive reform.” Id.
Here, the 5th DCA reiterated the holding of the Fourth District, stating that “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.”
With the 5th DCA decision, it is becoming more apparent that the only way to get correction in the assignment of benefits area is through legislative reform approved by Congress.
As always, we will continue to keep you advised regarding any pertinent appeals or decisions from the Supreme Court. Should you have any questions regarding the above, do not hesitate to contact the undersigned.
Very Truly Yours,