Court ruling overturned in ‘Assignment of Benefits’ case

TALLAHASSEE, Fla. – Feb. 12, 2018 – As state lawmakers continue to grapple with the controversial insurance practice known as “assignment of benefits” (AOB), an appeals court Friday backed a restoration company in a breach-of-contract lawsuit involving the issue.

A three-judge panel of the 5th District Court of Appeal overturned a lower-court decision and ruled in favor of Restoration 1 CFL, LLC in a dispute with ASI Preferred Insurance Corp.

In assignment of benefits, homeowners who need repairs covered under the property insurance policies “sign over” their insurance benefits to a contractor. The contractor, in turn, pursues payments from insurance companies.

The issue has become controversial. Insurers argue that it has led to increased litigation and costs, driving up homeowners’ premiums.

In the case Friday, the restoration company provided emergency water-cleanup services for Alex Tchekmeian, an ASI Preferred policyholder. Tchekmeian then “assigned” his benefits to the restoration company, which then sought payment directly from the insurer.

However, Tchekmeian’s mortgage lender, Wells Fargo, did not agree to the AOB, and ASI Preferred said that his insurance policy required their consent for any assignment of benefits. The restoration company then pursued a lawsuit against ASI Preferred for unpaid or underpaid invoices.

An Orange County circuit judge dismissed the lawsuit, but the appeals court rejected that decision. It pointed to a December appellate-court ruling that said AOBs could not be restricted by requiring agreement from a mortgage lender.

“Because here, as in that case, the clause improperly restricts the assignment of post-loss claim benefits, contrary to Florida law, we reverse the dismissal of appellant’s (Restoration 1 CFL’s) action and remand (to the lower court) for further proceedings,” according to Friday’s ruling, written by appeals-court Judge F. Rand Wallis and joined by judges Richard Orfinger and Vincent Torpy.

The ruling came as the insurance industry lobbies the Legislature to make changes dealing with assignment of benefits, but the Florida House and Senate remain divided about the issue.

Source: News Service of Florida