Fourth DCA Cases Deliver Setback on Assignment of Benefits Issue
The Fourth District Court of Appeal recently issued three opinions that compound the concerns of insurers dealing with increased claims costs due to assignments of benefits. This latest setback follows an earlier decision of the Fifth DCA rejecting an insurer’s argument that post-loss assignments should be prohibited based on a contractor’s not having an insurable interest in the property. These cases collectively suggest that the legislature, at not the courts, is the only forum that can address abuses with assignments of benefits.
In One Call Property Services v. Security First, the Fourth DCA considered a lawsuit brought by a contractor that provided emergency water removal services to an insured pursuant to an assignment of benefits. The contractor sued the insurer alleging that it did not adequately reimburse the contractor for services the contractor provided. The insurer moved to dismiss the suit arguing that the contractor lacked standing to sue under the policy and that the assignment was invalid. The trial court dismissed the contractor’s complaint and found that the policy precluded the contractor, as assignee, from bringing a suit to determine the amount of the loss or what was due under the policy.
The Fourth DCA reversed the dismissal and cited case law specifying that when an insurance policy does not contain a provision forbidding assignment, the policy and rights thereunder may be assigned just as with any other contract. The court further stated that the insured may assign rights to post-loss benefits even when the policy contains a provision barring assignment of the policy itself.
The insurer argued that at the time of the loss, the insured had nothing to assign because no benefits were due and owing under the policy. The court therefore considered whether a payment must be due under the policy before the right to the payment may be assigned. The court found that an assignable right to benefits under a policy accrues at the date of loss even though payment is not due at that time. As long as the insured thereafter complies with his or her obligations under the policy, an assignment of the right to recovery under the policy is valid.
The court acknowledged that the issues in the case present competing public policy considerations. The insurer argues that post-loss assignments allow contractors to unilaterally dictate pricing and drive up the cost of claims. Contractors respond that assignments are necessary to ensure policyholders have access to emergency services, especially when policyholders otherwise cannot afford those services. The court concluded these issues are more properly considered by the legislature than the courts.
The Fourth DCA also issued short opinions in ASAP Restoration and Construction, Inc. v. Tower Hill Signature Ins. Co. and Emergency Services 24, Inc. v. United Property & Casualty Ins. Co. These opinions remanded cases to the trial court finding that post-loss assignments are not prohibited for the reasons outlined in the One Call case. The court noted, however, that it was not addressing other issues in the cases such as whether the assignments violated public adjuster laws or insurable interest requirements (although the Fifth DCA recently ruled adversely to insurers in an insurable interest case).