Earlier today, Florida’s legislators approved Senate Bill 2A and sent it to Governor Desantis for signature. The statute makes dramatic changes to Florida’s property insurance statutes, and, for contractors, signals the end of an era and a need for immediate changes in how those that perform work where insurance proceeds are involved run their business.
Senate Bill 2A is just over 100 pages long, and while it has wide ranging impacts on property insurance and property insurance lawsuits, one section of it immediately affects how many contractors run their businesses. Section 627.7152—Florida’s assignment of benefits law passed in 2019 and amended in May of 2022—is changed in two significant ways.
First, 627.7152(2)(a)(1) is added, and reads as follows:
An assignment agreement must: be executed under a residential property insurance policy or under a commercial property insurance policy as that term is defined in s. 627.0625(1), issued on or after July 1, 2019 and before January 1, 2023.
In essence, contractors and homeowners can only enter into an “assignment agreement,” as that term is defined elsewhere in the statute, relating to policies issued between July 1, 2019 and January 1, 2023. Since insurance policies typically only last for one year at a time, this essentially ensures that by December 31, 2023, there will be no policies in existence for which an assignment of benefits would be allowed.
Second, 627.7152(13) is modified, and reads as follows:
Except as provided in subsection (11), a policyholder may not assign, in whole or in part, any post-loss insurance benefit under any residential property insurance policy or under any commercial property insurance policy as that term is defined in s. 627.0625(1), issued on or after January 1, 2023. An attempt to assign post-loss property insurance benefits under such a policy is void, invalid, and unenforceable.
This revision prohibits homeowners from entering into an assignment agreement with respect to a loss under a policy issued after January 1, 2023. And if a homeowner attempts to, then the statute automatically makes such an agreement unenforceable.
While these changes are not law yet, it is anticipated that they will be signed shortly by Governor Desantis and become law at the start of the year.
In response, contractors, especially those that work on projects where insurance proceeds are at issue need to focus on making the following adjustments to their business.
AOBs are out. Enforcing AOBs has been increasingly tough over the past three years, but it is going to be impossible. Don’t bank on long shot arguments that your contract isn’t really an assignment agreement. Work with an attorney to revise or draft new agreements that provide you with as many protections as possible.
Protect your lien rights at all costs. One reason contractors used AOBs and tolerated insurance carriers was because, at the end of the day, the insurance carrier had deeper pockets than the homeowner and was likely to pay at least some of the claim. With that security (to the extent any of it has been secure lately) gone, contractors need to be prepared to confirm property ownership, send notices to owner when applicable, track lien deadlines, and record construction liens early and often. Remember, recording a construction lien doesn’t mean you have to enforce it right away. You can record a lien while you and the homeowner wait for the insurance carrier to make a payment under the policy.
Look into offering financing options. But remember, Florida has licensing and other requirements to offer financing as part of the sale of home improvements. So this option is going to require additional time and effort to implement.
Senate Bill 2A is too one-sided and does too little to address the real issues impacting Florida’s property insurance problems. I anticipate that these problems will be back in front of the legislature again in the next couple of years. But in the meantime, protect your business and work within the new laws to ensure that your contracts remain enforceable.
You can click here to download a copy of the full Senate Bill 2A to read.