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Insurer argues justices should uphold ‘assignment of benefits' ruling

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TALLAHASSEE, Fla. – Amid a fierce legislative debate about the insurance practice known as assignment of benefits, a property insurer this week asked the Florida Supreme Court to uphold an “AOB” ruling in a closely watched case.

Attorneys for Ark Royal Insurance Co. filed a brief late Wednesday at the Supreme Court in a St. Lucie County case stemming from water damage to a home. A restoration firm, Restoration 1 of Port St. Lucie, contends that the 4th District Court of Appeal improperly backed restrictions included in the homeowners’ policy with Ark Royal Insurance.

In assignment of benefits, homeowners in need of repairs sign over benefits to contractors, who ultimately pursue payments from insurance companies. Insurers contend that the practice has become riddled with fraud and litigation, while plaintiffs’ attorneys and other groups say it helps make sure claims are properly paid.

Restoration 1 of Port St. Lucie filed a lawsuit against Ark Royal Insurance Co after policyholders John and Liza Squitieri sustained water damage to their home. Liza Squitieri contracted with Restoration 1 of Port St. Lucie to do cleanup work and assigned the benefits to the firm.

Ark Royal, however, refused to pay the full amount requested by the restoration firm, pointing to an insurance contract that required approval from the husband, wife and the Squitieris’ mortgage company, PNC Bank, for benefits to be assigned to the contractor. Restoration 1 claimed breach of contract but lost in circuit court and at the 4th District Court of Appeal.

In the brief filed Wednesday, Ark Royal Insurance contended that the contract requirement was not “superfluous” and had valid purposes in requiring the wife, husband and mortgage company to sign off before benefits could be assigned.

“If a third party presents Ark Royal with an assignment of a claim benefit, (the disputed part of the contract) simply assures that those insureds with a vested interest in the claim benefit being assigned have consented to the assignment,” wrote Ark Royal’s attorneys, who include former Supreme Court Justice Kenneth Bell. “This condition protects the rights and interests of all parties to the insurance contract.”

The brief also pointed to a legal foundation for the contract requirement.

“The freedom of contract allows parties to a casualty insurance contract to agree that an assignment of claim benefits must have the written consent of other insureds and the named mortgagees,” the brief said. “No Florida law or public policy precludes a court from enforcing such a condition.”

In a brief filed last month at the Supreme Court, however, attorneys for Restoration 1 of Port St. Lucie contended that such restrictions are aimed at achieving the “insurance industry’s ultimate objective of eliminating AOBs.”

“To be clear, Ark Royal’s requirement that an AOB be signed by the mortgagee (the mortgage company) makes an insured’s post-loss assignment of benefits a practical impossibility,” the brief said. “Allowing it to stand not only eliminates an insured’s right to freely assign post-loss claims, but also does an end-around the normal legislative and regulatory processes that are in place to protect the citizens of Florida from such an overreach.”

The Supreme Court has agreed to take up the case but has not scheduled oral arguments.

In its ultimate ruling, the Supreme Court could resolve a conflict between the 4th District Court of Appeal in the Royal Ark case and a decision by the 5th District Court of Appeal in another case involving similar restrictions on assigning benefits.

Security First Insurance Co. took a case to the 5th District Court of Appeal after the Florida Office of Insurance Regulation rejected a company proposal to add the AOB restrictions to policies. A panel of the 5th District Court of Appeal upheld the position of the Office of Insurance Regulation.

The Supreme Court is considering the St. Lucie County case as the House and Senate consider bills that would revamp assignment of benefits. The insurance industry and business groups are lobbying heavily for changes, including trying to reduce litigation about AOB disputes. Plaintiffs’ attorneys and parts of the restoration industry are fighting the House and Senate proposals.