Two Florida appellate courts are contradicting each other on a matter important to not only the state's construction industry, but the insurance industry as well. The courts have come to conflicting decisions on whether insurance companies can require policyholders to seek mortgagees' consent for assignment of benefits (AOB).
After a hurricane (or other insurance-covered event) damages their home, many Floridians assign their insurance rights to construction companies so they can have repairs done without making up-front payments. These AOB agreements are popular throughout the state as a means of getting repairs done sooner rather than later.
Insurance industry lobbyists argue that AOB limitations are needed to reduce abuse and fraud and ultimately lower insurance premium costs.
There are claims that some unscrupulous contractors assigned benefits will inflate the repair costs and then sue when insurers deny the claims. AOB-related lawsuits have spiked from 405 in 2007 to 28,000 in 2016.
As courts wrestle with AOB matters, they keep an eye on the Florida legislature, hoping that body will tackle AOB policy and resolve flaws in the system. So far, however, lawmakers have been unable to successfully resolve their own differences on AOBs.
Three Florida District Courts of Appeal have weighed in on AOB conditions requiring written consent of the insured and all named property mortgagees. The Second Florida District Court of Appeal upheld the conditions without comment. The Fourth Florida District Court of Appeal struck them down with a detailed analysis, and the Fifth Florida District Court of Appeal has twice held that the conditions are invalid under Florida common law.
One of the cases has been appealed to the Florida Supreme Court, which is expected to resolve the AOB battles.