While assignment of benefit agreements are quickly being phased out for insurance payments on construction projects, it’s important for contractors who plan to continue to use them while they can to know how courts have been applying Florida’s assignment of benefits statute and what contractors need to do to be compliant with those decisions.
Introduction.
Historically, contractors in Florida have been able to use an assignment of benefits to secure their right to payment on a project by having the homeowner assign the right to payment from the insurance carrier directly to the contractor. In July 2019, Florida enacted section 627.7152, Florida Statutes, which set forth specific requirements and limitations for assignment of benefits agreements for construction projects. After the passage of that act, approximately 20 trial court orders were entered along with two appellate decisions were issued, providing guidance on the statute. On May 26, 2022, 627.7152, Florida Statutes, was amended. Following the amendment, approximately 10 more appellate decisions have come down interpreting the statute. Finally, on December 16, 2022, 627.7152, Florida Statutes, was amended a final time, largely doing away with the use of assignment of benefits agreements in Florida for insurance payments on construction projects.
Where We Are Today.
As of the date of this post, under the December 16, 2022 revisions to 627.7152, Florida Statutes, contractors can use an assignment of benefits, and homeowners can enter into an assignment of benefits, if the insurance policy being assigned was issued on or after July 1, 2019 and before January 1, 2023. Based on this language, it appears that a contractor and homeowner could technically enter into an assignment of benefits agreement after January 1, 2023, so long as the relevant insurance policy was issued before January 1, 2023. Further, assignment of benefits agreements entered into prior to December 16, 2022, should be unaffected by the change in statute. You can click here to review my prior analysis of the revisions to 627.7152, Florida Statutes, contained in SB-2A.
Based on this change, there are two important dates that will be relevant to assignment of benefit agreements. First, the date of the assignment of benefits determines whether it must comply with the requirements of 627.7152. See Water Damage Express, LLC v. First Protective Insurance Company and Total Care Restoration LLC v. Citizens Property Insurance Corporation. If the assignment was executed after July 1, 2019, then it must comply with the requirements of the statute. Second, the date of the policy now determines whether the policy is assignable and whether any assignment would be enforceable, regardless of statutory compliance. That date is as set forth above, and must be between July 1, 2019 and January 1, 2023.
If you plan to continue to use assignment of benefit agreements into next year, you should absolutely ask to see the relevant policy and see if your agreement will be enforceable or not based on the date of the policy.
In addition to the most recent changes to the statute, there have been multiple court opinions that have come out providing clarification on what is needed to comply with the statute. These decisions will still be meaningful for as long as there are policies issued between July 1, 2019 and January 1, 2023 still in force. First, it is absolutely critical that assignment of benefits agreement comply with the statute. Under Kidwell Group, LLC v. ASI Preferred Insurance Corp. (decided 11/22/22), an assignment of benefits that is invalid under the statute is void, rather than merely voidable, and an insurance carrier has standing to challenge the validity of the assignment based on failure to comply with the statute.
Further, the assignment agreement must have a written, itemized, per unit cost estimate. While this language comes from the statute, Florida’s courts have interpreted this to require a specific, itemized price list, tailored to the project. For example, in Air Quality Experts Corp. v. Family Security Insurance Company, it was not enough that a standard price list with per room unit prices listed was attached. The court indicated that the estimate needed to include information the number of rooms and what pricing was going to apply to those specific rooms, and a specific total. Similarly, in Kidwell (referenced above), the court determined that an invoice delivered the day after the assignment was signed was not compliant with the itemized estimate requirement of the statute.
Finally, courts also appear to be interpreting the statute broadly. In Kidwell Group, LLC v. American Integrity Insurance Company (decided 9/16/22), the court evaluated an assignment agreement that, on its face stated that that assessment provided under the agreement was not meant to “protect, repair, restore, or replace damaged property or to mitigate against further damage to property.” This language appears to have been intended to attempt to remove the agreement from the statutory definition of an assignment agreement subject to 672.7152. But, the agreement also indicated that the purpose of the agreement was “to determine repairability, scope and/or categorization of water damage, testing for contamination including bacteria and/or mold in order to prepare a forensic engineering report and/or remediation protocol report that may be used to prescribe or confirm proper remediation procedures for the damaged property.” While the court acknowledged the express disclaimer attempting to remove the agreement from the statute, the court concluded that if the agreement, looks like a duck, and quacks like a duck, its a duck. In other words, agreements that seem like assignment agreements, even where they contain language expressly indicating they are not, could be deemed by courts to be assignment agreements.
Court decisions like this make it harder for contractors to determine if their existing agreements are compliant with the statute, or need to be. If you plan to continue to use assignment of benefit agreements for a period of time longer, you need to make sure that you have them reviewed regularly when new court decisions come out, and that you have a plan in place for when there are no more policies applicable that were issued before January 1, 2023.