After 7 years of failed attempts, Governor Ron Desantis recently signed a bill to reform Assignment of Benefits (“AOB”) in Florida. In general, AOB agreements allow policyholders to give up their insurance contract rights to third-parties in exchange for quick repairs and relief from the hassle of dealing with claims.
In recent years, many contractors have taken advantage of Florida’s unique one-way attorney’s fee-shifting statute for insurance coverage litigation. The rule incentivized contractors to, via the AOB mechanism, charge property owners’ outrageous amounts and to then pursue needless, often frivolous, and expensive litigation against insurance companies.
According to the new bill, an AOB must: (1) Be in writing and executed by and between the assignor and the assignee; (2) Contain a provision that allows the assignor to rescind the assignment agreement without a penalty or fee by submitting a written notice of rescission signed by the assignor to the assignee within 14 days after the execution of the agreement, at least 30 days after the date work on the property is scheduled to commence if the assignee has not substantially performed, as at least 30 days after the execution of the agreement if the agreement does not contain a commencement date and the assignee has not begun substantial work on the policy; (3) Contain a provision requiring the assignee to provide a copy of the executed assignment agreement to the insurer within 3 business days after the date on which the assignment agreement is executed or the date on which work begins, whichever is earlier; (4) Contain a written, itemized, per-unit cost estimate of the services to be performed by the assignee.
Under the new bill, contractors will no longer be able to blindside insurers with outlandish bills with the expectation that an insurance company will eventually pay it. Contractors will be required to provide detailed estimates in advance of performing the work in order to effectively obtain an AOB.
Furthermore, in the event of litigation, the new bill places the burden on the assignee. In a claim arising under an AOB, the assignee has the burden to demonstrate that the insurer is not prejudiced by the assignee’s failure to: (1) Maintain records of all services provided under the assignment agreement; (2) Cooperate with the insurer in the claim investigation; (3) Provide the insurer with requested records and documents related to the services provided, and permit the insurer to make copies of such records and documents; (4) Delivery a copy of the executed assignment agreement to the insurer within 3 business days after executing the assignment ow work has begun, whichever is earlier. Like a policy holder, assignees must cooperate with the insurer.
From the insurance company standpoint, one of the most important aspects of the new legislation is the establishment of a prevailing party fee shifting provision. When the law goes into effect, if an AOB company refuses a pre-suit offer to settle a dispute, it may be liable for all of the insurance company’s attorneys’ fees and costs incurred during litigation. Additionally, the new legislation requires insurance companies to monitor and compile data on AOB lawsuits. Furthermore, the legislation permits insurance companies to issue policies that prohibit or permit post-loss AOBs.
When signed into law by DeSantis as anticipated, the legislation will apply to all AOBs executed on or after July 1. Any AOB that does not comply with the requirements of Florida Statute 627.7152(2)(a) will be invalid and unenforceable.
This AOB legislation, the first of its kind in the nation, is truly a wide-reaching compromise that should benefit consumers, businesses and insurance companies while reigning in out-of-control litigation that has overrun our courts.