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Exciting New Assignment of Benefits Law Passes

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H.B. 7065 passed last week and Governor DeSantis has promised to sign it!

This is great news for consumers and insurers alike. The law is designed to curb the onslaught of assignment of benefits cases, which have plagued the courts for the last five years. The new law has a lot of moving parts. It also creates many new opportunities for insurers to save money and prevent these “AOB” claims from reaching the litigation phase. Our firm can assist you in designing protocols to avoid some of the traps created by the new law. While the new law can save insurers money, it also presents new challenges for insurers by creating new responsibilities and deadlines. However, before discussing any protocols, one must understand the underlying new issues and responsibilities for all parties.

THE NEW AOB REQUIREMENTS

Under the new law, the assignees (AOB companies) will be required to do many things they previously did not have to contend with.

The assignees now will have to:

  1. Put their assignment in writing. This will eliminate the theory of “equitable assignments” sometimes pled and argued by the assignees and accepted by some judges.
  2. Both the assignee and assignor will have to sign the AOB. Again eliminating the “equitable assignment argument.”
  3. The AOB must allow for rescission under certain circumstances by the insured.
    • Due to the timeframes involved, this most likely will only come into play with roofs or restoration contracts.
  4. The AOB must be provided to the insurer within three business days after the date of which the assignment is executed or the date on which the work begins, whichever is earlier.
    • The statute also provides for very specific means of delivery of the assignment to the insurer.
    • Insurers still will need to inspect right away before any water mitigation is completed.
  5. The AOB must contain a written, itemized, per-unit cost of the services to be performed by the assignee.

The AOB must contain a specific 18 POINT UPPER CASE AND BOLD WARNING to the insured regarding the insured’s rights.

AOB COMPANIES PROHIBITIONS

The assignees will not be allowed to:

  1. Charge a penalty for rescission.
  2. Charge a “mortgage processing fee.”
  3. Have a penalty for cancellation of the agreement.
  4. Charge an “administrative fee.”
  5. Under “urgent or emergency circumstances,” the assignee may not receive an assignment of post-loss benefits under a residential property insurance policy in excess of the greater of $3,000 or 1% of the Coverage A limit under the policy.
  6. Assignments that don’t comply with this subsection are invalid and unenforceable.
    • Arguably any failures of the assignee to comply with the above provisions would provide the insurer a very sound affirmative defense, that the AOB is completely invalid and unenforceable.
    • This could potentially be a Motion for Summary Judgment issue as well.

NEW DUTIES FOR THE ASSIGNEE/AOB COMPANIES

Under the new law the assignees will now have to:

  1. Maintain records of all services.
  2. Cooperate with the insurer in the claim investigation.
  3. Provide the insurer with records and documents.
  4. Deliver the executed AOB within three business days.
    • A potential affirmative defense and Motion for Summary Judgment issue.
  5. Update the insurer with revised estimates.
  6. Perform work in accordance with “industry standards.”
  7. Submit to recorded statements and EUO’s pre-suit under certain circumstances.
    • A potential affirmative defense and Motion for Summary Judgment issue.
  8. Participate in appraisal and/or mediation under certain circumstances.

Additionally, assignees:

  1. Cannot modify managed care provisions under the policy.
  2. Cannot file suit until a written notice to initiate litigation has been served to the insurer.
    • The notice must contain certain information and has specific timing requirements.
    • A potential affirmative defense and Motion for Summary Judgment issue.

INSURERS NEW DUTIES

The insurers will also have some new obligations under the new AOB law.

The insurers now will have to:

  1. Have a provision in the policy for delivery of the AOB agreement.
  2. Respond in writing to the notice to initiate litigation within ten business days.
    • In the response, certain information must be present.
  3. Have procedures in place to respond to the notice to initiate litigation.

NEW POLICY OPTIONS FOR INSUREDS

Insurers may opt to provide policies in which the insured is not allowed to assign their rights under the policy to another. There are strict criteria which the insurer must follow in order to offer such policies. However, the price point will be lower, which will offer an incentive to most insureds to want to opt for this policy, rather than the one in which an AOB is allowed. Hopefully, this voluntary option selection by the insured will allow this provision to withstand any challenges in the courts.

I predict in the future most insureds will opt for these less expensive policies, which will allow insurers to pass the savings along to the consumers.

ATTORNEY’S FEES

The law also totally changes who will be considered the “prevailing party” for purposes of attorney’s fees, depending on an analysis of the judgment amount and the “disputed amount.” If the judgment is less than 25% of the “disputed amount” the insurer is entitled to an award of reasonable attorney’s fees. If the judgment is between 25% and 50% of the “disputed amount” no party is entitled to attorney’s fees. Only when the plaintiff (AOB company) receives a judgment of 50% or more over the “disputed amount” are they entitled to attorney’s fees.

This section dramatically changes the “risk/reward” structure previously involved in these cases. In the past, insurers have settled these cases, to avoid paying exorbitant attorney’s fees. There is a provision which states that the insurer can waive its right to fees under certain conditions if the insurer fails to inspect or provide authorization for repairs.

The statute also allows for potential attorney’s fees to the insurer if the assignee files a voluntary dismissal and then refiles a second case. Unfortunately, the statute gives the court discretion in this instance.

INSUREDS OBLIGATIONS

The new AOB law also codifies what probably was considered common sense and already law.

The insured must:

  1. Pay the deductible under the policy.
  2. Pay for any betterment ordered.
  3. Pay for any work done before any rescission by the insured of the assignment.

We believe we can help you predict the future strategies of the plaintiff’s attorneys, who are already plotting to exploit the perceived loopholes in the new law. Some may argue the law does not even apply to their clients. Some may file suit prematurely. Some will undoubtedly make constitutional challenges.

If you wish to have our firm present some protocols to help you navigate through this maze of new legislation, please contact us at info@roiglawyers.com.

This article is not intended to create an attorney-client relationship by offering this information, and anyone’s review of the information shall not be deemed to create such a relationship. The content provided is intended to provide information of general interest to the public and is not intended to offer legal advice about specific situations or problems. You should consult a lawyer with regard to specific law issues that require attention.

For additional information, please contact Jeffrey Tutan of Roig Lawyers at 954-354-1546 or by email at jtutan@roiglawyers.com. Jeffrey is a partner in the Deerfield Beach office of Roig Lawyers, head of the firm’s trial division and co-chair of the first party property division.

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