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Court Rejects AOB Workaround

Court Rejects AOB Workaround

The Florida legislature has taken a series of steps in recent years to curtail abuses in Florida’s residential property insurance market. Policymakers and industry representatives typically point out that it can be several years before the full effects of statutory changes are known. This is largely because most legislative changes apply prospectively, meaning their effectiveness can be evaluated only after policies renew over the ensuing year and experience develops under those future policies.

Legislative changes also can be subject to varying attempts to challenge or work around the intended reforms. In these instances, the litigation that follows can last several years. This leads to delays in recognizing whether, or the extent to which, intended changes are effective. Of course, this litigation also has its own costs.

These effects were on display in a case recently decided by Florida’s Fifth District Court of Appeal (DCA) in Holding Insurance Companies Accountable, LLC v. American Integrity Insurance Company. This case, which was decided on January 3, 2025, related to the interpretation of Assignment of Benefit (AOB) reforms adopted in 2019.

Attempted AOB Workaround

The court considered a fact pattern in which the insured hired a roofing contractor and executed a “Direction of Payment” (direction to pay) specifying the insurer should remit payments directly to the roofing contractor. Then, the policyholder entered into an “Assignment of Benefits Contract” with a third-party, Holding Insurance Companies Accountable, LLC (HICA). The purported purpose of the HICA agreement was to ensure the insurance company made payments to the roofing contractor and to “hold my insurance company accountable for their obligation(s) under the policy…”

HICA sued the insurer for allegedly not paying the full value of the insured’s claim in accordance with the direction to pay. The insurer argued that HICA lacked standing to sue under the policy because the purported assignment of benefits did not comply with Florida law and was invalid and/or void. HICA responded that its contract was not an assignment agreement within the meaning of Section 627.7152, Florida Statutes, because it is not a contractor and does not perform repair or remediation services. The trial court sided with the insurer, and the appeal to the Fifth DCA followed.

If It Looks Like a Duck…

The Fifth DCA rejected HICA’s attempt to place form over substance. Upon reviewing the statute, the court wrote, “. . . this mandatory passthrough of benefits from HICA to [the roofing contractor] places the assignment within the broad reach of section 627.7152.” The court went on to say HICA’s boilerplate attempt to disclaim application of the anti-assignment law did not “sanitize” the “dispositive, undisputed fact” that the point of HICA’s contract was to seek funds to facilitate repairs to the insured’s home.

The Fifth DCA’s opinion therefore should bring an end to at least one attempted avenue to get around Florida’s effort to reduce the effects of AOB’s on Florida property insurance claims.