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Court Upholds Conditions on Assignments

Court Upholds Conditions on Assignments

Florida’s 4th District Court of Appeal in Restoration 1 of Port St. Lucie v. Ark Royal Insurance Company determined that an insurer may require approval of all insureds and the mortgagee before an assignment of benefits is valid.  This ruling differs from a conclusion reached by the 5th DCA last year after the Office of Insurance Regulation disapproved a policy condition requiring this type of consent (Security First v. Office of Insurance Regulation, 232 So. 3d 1157 (Fla. 5th DCA 2017)).

In Ark Royal, the insurer had a provision in its homeowners policy prohibiting the assignment of claim benefits without the consent of all insureds, additional insureds and mortgagees.  When the insured’s home suffered water damage, the insured signed an assignment of benefits in favor of a water mitigation company.  The assignment did not include the consent of the insured’s husband or the mortgage company.  The insurer did not recognize the assignment, and the vendor filed suit.

The vendor argued that the well-established law of Florida allows post-loss assignments without restriction.  However, the 4th DCA found this interpretation of the law to be too broad.  The 4th DCA stated that an insurer cannot require its consent to the assignment, but nothing in Florida law precludes the insurer from conditioning the effectiveness of an assignment on the consent of all insureds and mortgagees.

The 4th DCA recognized its decision conflicts with Security First, but found that the Security First court misapplied the law.  To the extent the decisions are in conflict, the 4th DCA certified the question to the Florida Supreme Court.