Florida Fourth District Court of Appeals Upholds and Validates Assignment of Benefit Insurance Policy Language

The Florida Fourth District Court of Appeals on September 5, 2018 upheld and validated insurance policy language that requires the signatures of all insureds and mortgagees on an assignment of benefits (AOB).

The policy language stated “[n]o assignment of claim benefits, regardless of whether made before a loss or after a loss, shall be valid without the written consent of all “insureds,” all additional insureds, and all mortgagee(s) named in this policy.”

In Restoration 1 of Port St. Lucie a/a/o Squitieri v. Ark Royal Ins. Co., Mrs. Squitieri alone contracted with Restoration 1 to remediate water damage in the home. She signed an AOB with Restoration 1. Her husband, another named insured on the policy, did not sign the AOB. Neither did the mortgagee, despite policy language requiring written consent of all mortgagees.

When presented with the water remediation bill of $20,305.74, insurer Ark Royal refused, indicating the AOB did not have all the required signatures. Restoration 1, as purported assignee, sued Ark Royal for breach of contract, and also sought a declaratory judgment that the policy language in issue was inconsistent with Florida public policy. The trial court granted Ark Royal’s motion to dismiss, stating that “the Assignment of Benefits fails to comply with the subject policy’s unambiguous condition that claims assignments be executed by all insureds and mortgagees.” Restoration 1 then appealed.

At the plaintiff’s urging, the Fourth DCA considered the 1917 Florida Supreme Court opinion West Florida Grocery Co. v. Teutonia Fire Ins. Co., which recognized Florida’s common law validity of assignments after a loss. The appellate court agreed that a blanket ban on AOBs would be impermissible, and that an insurer cannot require insurer consent to AOBs. But the appellate court found no prohibition for an insurer requiring consent from all insureds and mortgagees. The Fourth DCA departed from the holding by Florida’s Fifth DCA in the 2017 decision Security First Ins. Co. v. Florida Office of Insurance Regulation, in which the Fifth DCA held invalid a policy requiring consent of all insureds and mortgagees for an AOB to be valid. The Fourth DCA agreed with Ark Royal that “both of the insureds, as well as the mortgagee, have a vested interest that a reputable, legitimate third-party contractor perform repairs on the home,” and indicated the decision reached by the Fifth in the Security First case misinterpreted the West Florida Grocery case.

The Fourth DCA concluded by certifying the conflict with the Fifth DCA, so a Florida Supreme Court review is likely. It also is unclear whether Florida’s Office of Insurance Regulation will approve similar policy language going forward – admitted insurers in recent years have not been successful in having similar language approved. Finally, the Fourth DCA left any public policy concerns to be “best addressed by the legislature, not the courts.”

The upshot: judicial support for the curbing of AOB abuse in Florida is welcome news, but not a complete fix for the AOB problem.

Restoration 1 of Port St. Lucie a/a/o John and Liza Squitieri v. Ark Royal Ins. Co., 4D17-1113, Fla. 4th DCA September 5, 2018.