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Third District Upholds Restriction on Post-Loss Assignments

Third District Upholds Restriction on Post-Loss Assignments

Florida’s Third District Court of Appeal (DCA) added to a list of cases upholding the ability of policyholders to assign post-loss benefits under insurance policies.  The Third DCA reached this decision based on prior caselaw in Florida.  However, the court also  acknowledged that the Florida legislature revised Florida law in this area after the events giving rise to the particular case.

The court in Extreme Emergency Fire & Water Restoration LLC v. Certain Underwriters at Lloyd’s of London considered a case arising from water damage to a home in September 2018.  The policyholders hired a water mitigation vendor and assigned that vendor their right to insurance payments.  When the insurer refused to pay the invoiced amount, the vendor sued.

The insurer asserted several defenses, including that the application specified the rights, benefits and duties under the policy could not be assigned without the insurer’s consent.  The application indicated this restriction applied in consideration of the premium paid by the insured.

The vendor argued this anti-assignment provision was void as contrary to Florida law.  The trial court disagreed and sided with the insurer.  However, the Third DCA reversed and found that the anti-assignment provision indeed violated Florida law.  The Third DCA reasoned it is well-settled in Florida that an insured need not obtain the consent of an insurer before making a post-loss assignment of its right to payment of a claim.

The insurer argued that in this instance, the parties voluntarily negotiated for the anti-assignment provision.  The insurer argued this case therefore was unique as contrasted with cases in which insurers unilaterally imposed the condition within the insurance policy.  The Third DCA, however, called this “a distinction without a difference.”  The court noted the application and the policy together constitute the insurance contract.  The court went on to find any revisions to Florida’s long-standing law should be left to the legislature…. which the court acknowledged the legislature did effective July 1, 2019.

It is unclear why courts believe insurers and insureds cannot voluntarily contract for terms that differ from those otherwise set forth or provided by law.  Nonetheless, the impact of these decisions will diminish over time as current and future assignments are governed by the 2019 legislative reforms.