Middle District of Florida Holds That Roofing Contractor’s Assignment of Benefits Was Valid, but Lacked Standing to Sue Insurer

By Michael J. Raudebaugh

The Middle District of Florida recently tackled a complicated property damage dispute involving a condominium association, its insurance carrier, and a third-party roofing contractor. In CMR Constr. & Roofing v. Orchards Condo. Ass’n, Inc., which consolidated three out of the five lawsuits arising from this loss, the district court resolved a threshold dispute regarding the validity and enforceability of three agreements executed at roughly the same time between the association and CMR Construction and Roofing, LLC (“CMR”). The Middle District ultimately determined that CMR’s assignment of benefits was valid and enforceable. However, the court held that because the assignment was limited to insurance proceeds for work performed by CMR, it did not have standing to sue the insurer for work performed by a different contractor.

The dispute began when the condominium association suffered damages as a result of Hurricane Irma. It reported the claim to its property insurer, who determined that only two of the association’s thirty buildings were eligible for payment after application of deductibles and limits for each building. The association subsequently entered into three agreements with CMR to perform roof and gutter work at the property. The first was a roofing agreement that failed to contain any details for the work CMR was to perform, with all “specifications” for roof and gutter work, along with the total agreed amount, marked as “TBD.” On the same day, the association executed an assignment of benefits agreement, which assigned all of the association’s insurance benefits to CMR so that it could perform the roof repairs after the scope of work was approved by the insurance company. Two and a half weeks later, the association and CMR executed an addendum agreement, which added specifications for the work to be performed by CMR.

CMR then sued the insurer for breach of contract related to the amount of coverage for the loss. The carrier obtained summary judgment, with the court finding that the carrier did not breach the policy in failing to pay replacement cost value because CMR did not undertake any repairs to which the policy applied. The court further held that the insurer did not breach the policy in failing to pay actual cost value because CMR had never requested payment for actual cost value damages. This summary judgment order was subsequently affirmed by the Eleventh Circuit.

After summary judgment was granted in favor of the insurer, the association re-opened the bids for its roofing and gutters work and ultimately retained a different contractor. It also attempted to terminate its assignment of benefits with CMR, to which CMR responded by suing the association for, inter alia, breach of contract, fraud, and declaratory relief. The association then sued the carrier and CMR for breach of contract and declaratory relief. For good measure, CMR also sued the association’s new roofing contractor for tortious interference. That final suit was dismissed and affirmed on appeal by the Eleventh Circuit.

In a detailed analysis, the Middle District first held that the three agreements entered into by CMR and the association should be construed together as a single document, interpreting Florida’s contemporaneous instrument rule and incorporation by reference doctrine. This was important because the court determined that while the roofing agreement and assignment of benefits both lacked essential terms regarding the repairs to be performed by CMR, the addendum provided the needed sufficiency. Taken as a whole, the court held that the assignment of benefits was valid and enforceable. However, it further held – again by construing the three agreements as one – that the assignment of benefits was limited to work actually performed by CMR as approved by the insurance carrier. Because no such work was done by CMR and could not be done by CMR, given that it had already been performed by a different contractor, CMR lacked standing to sue the insurer for claim benefits.

This case could be viewed as the last gasp of roofing contractors claiming insurance proceeds under assignment of benefits agreements. Indeed, the Middle District acknowledged that its analysis likely would have been different under recent legislative changes. After this loss had occurred, the Florida legislature passed a law requiring assignment agreements to contain more detailed information concerning the services to be performed under the agreement. It then passed further legislation declaring all assignments to be invalid for insurance policies issued after January 1, 2023. Fla. Stat. § 627.7152(13). Regardless, the decision contains much useful analysis for interpreting contracts entered into by insureds and third-party contractors, which present ongoing issues for defense practitioners within the state of Florida.