CFO Patronis Highlights Concerns with Directions to Pay
Following Hurricane Debby, Florida Chief Financial Officer (CFO) Jimmy Patronis warned consumers about contractors using agreements designed to circumvent Florida’s prohibition against assignment of benefits (AOBs). In recent years, contractors’ widespread use of AOBs contributed to elevated losses, loss adjustment expenses and litigation in the Florida property insurance market. The Florida legislature included a prohibition against AOBs as part of the significant statutory reforms intended to curtail market abuses.
CFO Patronis pointed out, “Consumers are seeing more contractors trying to avoid the AOB prohibition outlined in Florida Law by contractually requiring homeowners to have their insurers pay insurance proceeds directly to the contractor.” The CFO noted these contract provisions often are labeled as a “Direct Payment Authorization” or similar direction to pay. Accordingly to the CFO, these contract arrangements often are prohibited AOBs.
This consumer warning provides a useful reminder about the importance of legislative changes prohibiting assignments. Consumers and insurers should be cognizant of efforts to avoid the reforms through contracts that essentially constitute AOBs under different labels.