The Tide is Turning to Curb the Abuse of Assignment of Benefits

By Amy L. Koltnow, Esq., Shareholder

Commotion has been stirred by the recent Florida appellate opinion in Restoration 1 of Port St. Lucie a/a/o Squitieri v. Ark Royal Ins. Co., and there remains hope that the tide is finally turning in favor of the insurance industry concerning its hard-fought battle against fraud and abuse involving the use of post-loss assignment of benefits in homeowner property claims.   

In Ark Royal, the Fourth District Court of Appeal upheld the validity of an “unambiguous” policy provision requiring the signatures of all the insureds and mortgagees for a post-loss assignment of benefits to be valid.  This decision directly conflicts with the Fifth District Court of Appeal’s opinion last year in Security First Ins. Co. v. Florida Office of Ins. Regulation, which upheld the OIR’s decision to disapprove Security First’s request to include such a restriction in its policy forms, based on its conclusion that the restriction was contrary to Florida law. The Ark Royal court certified a conflict with the Security First decision.

Now that a conflict exists between two district courts of appeal, either party may seek further review from the Florida Supreme Court to resolve the conflict. However, the supreme court’s jurisdiction is discretionary—which means the supreme court may decline to take the case.

The jurisdiction of the supreme court is invoked by the filing of a notice within 30 days of the order to be reviewed, followed by the petitioning party’s jurisdictional brief within 10 days. The respondent then has 20 days to file an opposing brief. These briefs address only the reasons why the court should hear the case and do not address the merits of the appellate court rulings.

What does this mean? It is possible the Florida Supreme Court will consider this issue to have a significant impact on the state’s strong public policy favoring parties’ “freedom of contract”, or perhaps consider addressing the governance of the Office of Insurance Regulation. OIR disapproved the inclusion of such policy provision when Security First asked to include the restriction its policy forms, but did not disapprove similar language included in Ark Royal’s policy.  The appellate courts, however, while seemingly empathizing with the arguments by the insurance industry of fraud and abuse, repeatedly have stated that these “public policy arguments” are best addressed by the Legislature.

What happens if the Florida Supreme Court does not accept jurisdiction? The decisions of the district courts of appeal will constitute the law for all trial courts within that district and must be followed. In property insurance claims in counties within the Fourth District, insurers may reject any post-loss assignment of benefits if it does not contain the signatures of all insureds and mortgagees, provided there is a similar policy provision requiring such signatures. In the Fifth District, such a policy provision is not enforceable and will not invalidate an assignment of benefits. In claims arising in the other districts, insurers act at their own peril if they deny AOB claims based on the failure to comply with such a policy restriction.

The impact of Ark Royal is by no means setting any clear path for insurers.  The OIR may step in and retroactively disapprove any policy form that contains such provision based on the holding in Security First.

Now that a conflict among two district courts has arisen, however, trial and appellate courts in other districts may follow either case. Based on prior AOB rulings, the First and Second Districts would likely follow the holding in Security First.  The Third District (Miami-Dade and Monroe Counties), arguably the district that is currently most impacted by fraud and abuse, has no controlling precedent on this issue, or similar issues regarding the validity of post-loss assignment of benefits.

Hopefully, these conflicting appellate decisions will incentivize the Florida Legislature to tackle this issue, despite its failure to take action in prior sessions.