Insurance Services – Coverage & Bad Faith Litigation

Key Points:

• As of July 1, 2019, pursuant to Florida Statute §627.7152, there are specific guidelines that an assignment of benefits (AOB) must adhere to.
• Statute requires that an AOB must be in writing and executed, contain a provision that allows for rescission without a penalty, and include a written itemized, per-unit cost estimate of the services to be performed by the service provider.
• Statute also specifies that an AOB may not have penalties or fees for cancellation, processing or administration.

In The Kidwell Group, LLC, d/b/a Air Quality Assessors of Florida v. United Property & Casualty Insurance Company, the Fourth District Court of Appeal upheld a dismissal of a breach of control suit brought by an assignee. The court found that an estimate attached to the complaint from five days after the date the AOB was executed did not satisfy the requirement that the Assignment contain a written itemized, per-unit cost estimate of the services to be performed.

On June 15, 2022, the Fourth District Court of Appel upheld a lower court’s dismissal of a breach-of-contract suit brought by an Assignment of Benefit (AOB) holder (assignee) because the AOB was invalid and unenforceable. Under Florida law, a valid AOB allows an assignee (such as water remediation companies, roofers and contractors) to receive benefits under a policyholder’s insurance policy in exchange for providing services or repairs relating to the policyholder’s property damage claim. Due to the increase in the number of entities seeking to provide services pursuant to an AOB, many Florida homeowners unwittingly engaged repair providers and executed AOBs in exchange for their services. Many times, after an AOB had been obtained from the policyholders, assignees subsequently, and often unilaterally, expanded the scope of the services to be provided or changed the prices for their services. Additionally, many companies began to take advantage of homeowners by offering a multitude of tests, assessments and evaluations, ostensibly related to their property damage claims, in an effort to obtain an AOB and bill their insurance carriers for the costs. As a result, Florida insurance carriers began seeing an ever-increasing tidal wave of assignee-related claims for questionable services and excessive amounts. This influx in claims ultimately translated into an influx of litigation between assignees and insurance carriers.

In an effort to curb this rampant litigation, the Florida Legislature passed §627.7152, detailing the specific guidelines an AOB must adhere to in order to be valid and enforceable. The law went into effect on July 1, 2019. The Statute requires that an AOB:

(1) be in writing and executed by and between the policyholder and the service provider;

(2) contain a provision that allows the policyholder to rescind the AOB without a penalty within a certain time;

(3) contain a provision requiring the service provider to provide a copy of the AOB to the policyholder’s insurance carrier;

(4) contain a written, itemized, per-unit cost estimate of the services to be performed by the service provider;

(5) relate only to specific types of repairs and services at the property;

(6) specifically notify the policyholder that they are giving up rights under their insurance policy which may result in litigation; and

(7) contain a provision requiring the service provider to protect the policyholder from any resulting liabilities, costs or losses.

In addition to indicating what an AOB must have, the Florida Legislature also specified what an AOB may not have, including penalties or fees for cancellation, processing or administration. Under the statute, an AOB that does not comply with these requirements is deemed to be invalid and unenforceable. Section 627.7152 also requires an assignee to provide the policyholder and the insurance carrier with a written notice of its intent to initiate litigation at least 10 business days before filing a lawsuit. The statute holds assignees’ feet to the fire by requiring that an AOB conform to specific, concrete, and uniform requirements or be deemed unenforceable.

The Fourth District Court of Appeal’s recent decision in Kidwell demonstrates just how strictly assignees will have to comply with §627.7152. In Kidwell, the AOB was deemed invalid and unenforceable because it was not in strict compliance with the requirements laid out in 627.7152. The court held that the AOB did not contain an itemized, per-unit cost estimate of the services to be performed, as required by law. In Kidwell, the plaintiff argued that it satisfied the requirements of § 627.7152 by providing the policyholder with an invoice dated five days after the AOB was signed. However, the court determined that a post-dated, unsigned invoice did not comply with the requirement that the AOB contain a per-unit cost estimate of the services to be performed and was, therefore, invalid.

In one of the first appellate rulings on this aspect, the Fourth District Court of Appeal’s decision in Kidwell has paved the way for other jurisdictions to reach the same decisive conclusion. It is the intent of the legislature that Statute 627.7152 will prevent assignees from potentially deceiving policyholders and insurance carriers by seeking reimbursement for inflated estimates and unnecessary repairs. The Kidwell decision’s strict enforcement of the statue will hold entities to account for their duplicitous tactics.

In an effort to get around the statute, Kidwell and other entities have argued that 627.7152 should not be applied retroactively to any claims on insurance policies issued prior to July 1, 2019, the effective date of the statute. However, the Second District Court of Appeal recently rejected that argument when it issued its opinion in The Kidwell Group, LLC d/b/a Air Quality Assessors of Florida a/a/o Robert and Maureen Mucciaccio v. American Integrity Insurance Company of Florida, 347 So.3d 501 (Fla. 2d DCA Sept. 16, 2022). There, the court found that the assignee has no rights to an insured claim until it executes a valid AOB with the policyholder. Therefore, the law in effect on the date the parties executed the AOB controls, not the law in effect when the insurance policy was issued. As a result, the court held that Florida Statute 627.7152 applied to Kidwell’s AOB as it was executed after the statute’s July 1, 2019, effective date.

As is clear from both of the recent Kidwell cases, the trend is to hold the assignee accountable and ensure they are providing reasonable services at reasonable costs. Strict compliance with Florida Statute §627.7152 for any AOB executed after July 1, 2019, will be required.