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Client Update; Florida Legislature Passes Sweeping Assignment of Benefits Legislation

May 6, 2019

Re: Client Update
Florida Legislature Passes Sweeping Assignment of Benefits Legislation

Significant changes are about to take place for Florida property insurers after the Florida legislature passed sweeping assignment of benefits (AOB) reform legislation last month. The legislation has passed in both the house and the senate, and Governor DeSantis has indicated that he will likely sign the legislation. The new legislation will amend Florida Statutes Section 627.422, the assignment of polices, and create Sections 627.7152 and 627.7153, which will be effective July 1, 2019.

Sections 627.7152 and 627.7153 will apply to assignments of post-loss benefits under residential and commercial property insurance policies “to or from a person providing services to protect, repair, restore, or replace property or to mitigate against further damage to the property.”

The legislation requires presuit notice and negotiation requirements. Under Section 627.7152(9), at least 10 business days before filing suit under the policy, the assignee must provide the insurer with:
(1) A detailed invoice or estimate, and
(2) A notice of intent to initiate litigation that specifies the damages in dispute, the amount claimed, and the assignee’s presuit settlement demand.

The insurer is then required to respond to the notice within 10 days by either:
(1) Making a presuit settlement offer; or
(2) Requiring the assignee to participate in appraisal of another method of alternative dispute resolution under the policy.

Like a policyholder, assignees must cooperate with the insurer. If an assignee fails to maintain records, provide the insurer requested documents, or deliver the agreement as required by § 627.7152(2)(a), the assignee will bear the burden in litigation of demonstrating a lack of prejudice to the insurer.

Section 627.7152(10) also changes the fee-shifting framework in AOB suits, providing the opportunity for insurers to recover their attorney’s fees under certain circumstances. If the difference between the judgment obtained by the assignee and the presuit settlement offer is:
(1) Less than 25% of the disputed amount, the insurer is entitled to an award of reasonable attorney fees.
(2) At least 25% but less than 50% of the disputed amount, no party is entitled to an award of attorney fees.
(3) At least 50% of the disputed amount, the assignee is entitled to an award of reasonable
attorney fees.

The new legislation also sets forth a number of requirements that assignments executed on or after July 1, 2019 must meet to be valid and enforceable, including but not limited to, an itemized, per-unit cost estimate of the services to be performed, and a provision requiring the assignee to provide a copy of the executed assignment agreement to the insurer within 3 business days after the execution of the agreement, or when the work begins.

The legislation will also require assignees to submit to examinations under oath, appraisals, and other alternative dispute resolutions. Additionally, insurers will be able to issue policies that restrict, in whole or in part, the ability of insureds to enter into assignment agreements. However, the insurer must also offer a policy that provides the same coverage without such restrictions, and the insurer must charge a lower premium for policies that contain restrictions than policies with no restrictions.

With the passage of this new law, new litigation will arise in the area of assignment of benefits. However, the legislation is prospective only, and will not impact existing assignment of benefits litigation. As always, we will continue to keep you advised regarding any pertinent legislative changes. Should you have any questions regarding the above, do not hesitate to contact the undersigned.

Very Truly Yours,