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Restoration and roofing contractors often use an assignment of benefits agreement when performing repairs under an insurance claim. An assignment of benefits (AOB), in the context of the construction industry, is an agreement that transfers insurance claim rights from the insured to a third-party contractor. This allows the contractor to deal directly with (and get paid by) the insurance provider.

These arrangements have their pros and cons and can often lead to litigation, disputes, and the potential for abuse. Florida has some relatively new laws governing AOBs — and, as a recent restoration contractor learned, they may be strictly enforced by the courts.

Florida’s Assignment of Benefits requirements

In 2019 Florida overhauled their assignment of benefits laws to curb growing concerns of AOB abuse within the state. 

“It is no secret that the State of Florida is currently in the midst an insurance crisis, which has resulted in numerous private insurance carriers to stop writing new homeowners policies in Florida, and for same carries, has resulted in bankruptcy or insolvency,” said insurance attorney Jake Huxtable of West Palm Beach, Florida.

“Per the research, a big reason why Florida is in an insurance crisis today is because of the assignment of benefits (“AOB”) abuse and significant influx of AOB lawsuits being filed by contractors against insurance carriers throughout Florida, ever since the passage of Hurricane Irma,” Huxtable said. “There is no dispute that the high volume of AOB litigation in Florida has had a direct, negative impact on not only homeowners insurance carriers, but also on the premiums and taxes that all of us homeowners in Florida are legally required pay in order to own a home and have it insured in Florida, which just continue to skyrocket present day.”

Learn more: Florida Property Insurance Crisis Poses Risk for Restoration Contractors

Given the sharp increase in AOB litigation, the court has strictly enforced these new requirements. Take, for example, a recent case out of a Florida District Court of Appeals.

AOB agreement invalidated for failure to meet strict requirements

The case in question is Kidwell Group, LLC v. United Property & Casualty Insurance.

Project Snapshot

Kivovitz’s Boynton Beach home was insured by United covering, among other things, direct physical losses to the property. In August of 2017, Kivovitz’s house sustained damage and a claim was submitted to United. Kidwell was brought in to perform the repairs in exchange for an assignment of benefits; allowing Kidwell to directly bill United for the work.

When the work was completed and invoiced, United allegedly failed to make full payment, leaving an unpaid balance of $3,000. Accordingly, Kidwell filed a breach of contract lawsuit against United. This case made it to the 4th District Court of Appeals, which upheld the trial court’s dismissal of Kidwell’s claim due to an insufficient AOB agreement.

The statute governing the requirements for Florida AOBs can be found under Fla. Stat. 627.7152, and more specifically for the purposes of this case subsection (2)(a) which reads:

“An assignment agreement must:

1. Be in writing and executed by and between the assignor and the assignee…

4. Contain a written, itemized, per-unit cost estimate of the services to be performed by the assignee”

The court began its analysis by stating that the plain language of the statute requires that at the time the AOB is signed, the property owner must be provided with an itemized list of the services to be performed and the costs thereof.

Upon review of the AOB agreement at issue, they affirmed the trial court’s dismissal of Kidwell’s claim:

“While [Kidwell] included the invoice as an attachment to the complaint along with the assignment of benefits, such invoice was unexecuted and dated five days after the assignment was executed… As such, the trial court properly concluded the assignment did not contain a written, itemized, per-unit cost estimate of services to be performed by [Kidwell] as required by sections 627.7152(2)(a)1 and 627.7152(2)(a)4.”

For restoration contractors in Florida, this serves to show that the courts are willing to strictly enforce these provisions and requirements to stifle the rising abuse of AOBs.

Prudent contractors should carefully review these requirements and ensure that their processes are in line with these new laws — specifically when it comes to cost breakdowns. As with every transaction, being upfront and communicating the services and costs clearly and upfront can help to avoid these types of disputes.

Related coverage: Ratings Downgrade Delivers Another Huge Blow to Florida’s Struggling Property Insurance Market

Thoughts from the attorney of record

Mr. Huxtable, the attorney representing United Property Insurance in this case had this to say about the result:

“The research and numbers don’t lie, and it is clear that the Legislature’s intent and purpose in enacting the AOB reform statute, 627.7152, was to put a stop to the AOB abuse by contractors in Florida, in hopes of halting and reducing the outrageously high number of AOB lawsuits that we’ve continuously seen being filed by contractors since 2017.”

“Yet, even since the passage and enactment of the new AOB reform statute, there has nonetheless been thousands of AOB lawsuits that these financially-motivated contractors continue to initiate and pursue, without remorse, across the courts in Florida claiming to have standing to sue based upon illegal, non-compliant AOBs that they 100% know do not comport or comply with the new AOB law, but they just don’t care and have continued to pursue their old ways by abusing AOBs and taking advantage of homeowners, to the detriment of everybody in Florida.”

‘But now that we have this new appellate opinion that I was fortunate enough to argue where the 4th DCA upheld the Legislature’s intent in enacting the AOB reform statute, I am hoping that all the other appellate and trial courts in Florida fall in line and enforce the Legislature’s purpose for creating this new law in the first place; that is, to finally curb the AOB abuse and put an end to the insurance crisis in Florida. Kudos to the 4th DCA for making the right decision in this AOB case of first impression, and I am humbled to have been a part of it.”

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