By David J. Salmon, Esq. and Andrew A. Labbe, Esq.

In three related opinions issued May 20, 2015, the Fourth DCA reversed trial court orders in favor of insurers finding that Plaintiff contractors lacked standing to bring suit because assignments of benefits (“AOB”) were invalid.[1] The One Call and ASAP Restoration cases had been dismissed by the trial courts, and the Emergency Services 24 case had been a summary judgment.

The Fourth DCA issued its primary opinion in One Call, and referenced that opinion in the other two reversals. The Fourth DCA included its finding that the trial court did not err in considering the terms of the insurance policy in the motion to dismiss, despite the fact that it was not attached to the complaint. The Court determined that, because the complaint referenced the insurance policy and One Call’s standing was premised on the existence of the insurance policy, the trial court was entitled to review it on a motion to dismiss.

The crux of the Fourth DCA’s opinion was that “an assignable right to benefits accrues on the date of the loss, even though payment is not yet due” under the policy. The appellate court cited to a number of cases which stand for the general proposition that a post-loss assignment is valid, even where the policy prohibits assignment without the insurer’s consent.

While the appellate court cited to the general statements made in those prior appellate rulings, a close review of the underlying facts in the prior cases reveal the facts in those cases are distinguishable from these cases before the Fourth DCA.  For example, the Fourth DCA in these ruling referenced the case of W. Fla. Grocery Co. v. Teutonia Fire Ins. Co., 74 Fla. 220 (Fla. 1917), quoting the proposition that “it is a well-settled rule that the provision in a policy relative to the consent of the insurer to the transfer of an interest therein does not apply to an assignment after loss.” In citing this rule of law, the court relied on a Georgia case in which the assignment occurred after the loss was adjusted between the insurer and insured, and an agreement was reached as to the amount due under the policy.[2]  Thus, the right to receive payment had accrued and was assignable, despite the presence of an anti-assignment provision. Moreover, the W. Fla. Grocery Court stated throughout its opinion that it was not ruling on the validity of the assignment of benefits, as the insurer had waived the right to contest its validity. That court did rule on the validity of the writs of garnishment at issue in that case, holding that because there was no indebtedness due at the time the writs were executed, they were invalid. Had the W. Fla. Grocery Court been able to rule on the validity of the assignment, this same analysis would likely have been applied to hold the assignment was invalid.

The Fourth DCA went on to state that “there is no reason why an insured could not assign an unaccrued right to benefits under the policy, so long as the assignment took place after the loss.” This holding effectively eliminates the very purpose of the distinction between pre- and post-loss assignments. The basis for that distinction has always been that a post-loss assignment has no effect on the risk undertaken by the insurer, and merely results in a change in the name of the payee on the check.[3] Conversely, though, it has been held that the purpose of an anti-assignment provision is to protect the insurer against or from an unbargained-for risk.[4]

The Fourth DCA’s holding does not address the question of, if an insured can assign an unaccrued right to payment the moment after a loss occurs (before any notice is given to the insurer or any obligation of the insurer is determined), why the law recognizes a distinction between pre- and post-loss assignments?  Forcing insurers to deal directly with vendors who exist to provide services seeking to profit from the insurance claim increases the risk undertaken by the insurer, regardless whether the assignment takes place before or after the loss. There simply is no practical difference between an assignment of benefits that occurs an hour after a loss occurs and one that takes place an hour before the loss occurs. In fact, when evaluating risk from the insurer’s perspective, there would be no difference between a post-loss assignment of unaccrued benefits and an assignment of benefits which occurred years before the loss occurs. In both cases, the insurer is forced to deal with a third party with whom it did not agree to contract. As a result, insurers are forced to deal with the very real problem of fraudulent and inflated billing, while the insured – with whom the insurer contracted – is effectively removed from the process. Further, the insurer is then also forced to deal with the threat of multiple lawsuits and multiple claims for attorneys’ fees.

The only way the distinction between pre- and post-loss assignments makes any sense in a real-world scenario is if the post-loss assignment is of an accrued right to benefits. Under those circumstances, there is no increase in the risk bargained for or accepted by the insurer, and the ability of insureds to assign the right to those accrued benefits is justifiable. The Fourth DCA’s ruling stretches the concept of post-loss assignments beyond its logical bounds, and can be expected to result in an increase in the already staggering number of AOB lawsuits in Florida, as well as potentially inflated and fraudulent billing practices by some vendors.

The Fourth DCA did expressly decline to rule on the other issues presented by the insurers as to the invalidity of the AOBs, including their violation of Florida’s public adjuster and insurable interest statutes, and whether the AOBs were partial assignments which were invalid without the consent of the insurer. These issues were remanded to the trial court for determination in the first instance. The Court also called upon the Legislature to investigate and undertake comprehensive reform, if studies indicate that use of AOBs in the insurance context is inviting abuse and fraud.

[1] One Call Prop. Servs. Inc. a/a/o Hughes v. Security First, Case No. 4D14-424; Emergency Servs. 24, Inc. a/a/o Meiselman v. United Prop. & Cas. Ins. Co., Case Nos. 4D14-576 & 4D14-3320; ASAP Restoration & Constr., Inc. a/a/o Casey v. Tower Hill Signature Ins. Co., Case No. 4D13-4174.

[2] Georgia Co-operative Fire Ass’n.  v. Borchardt, 123 Ga. 181 (Ga. 1905).

[3] See Int’l Sch. Servs. v. AAUG Ins. Co., Ltd., 2012 U.S. Dist. LEXIS 153683, *25 (S.D. Fla. 2012) (“[A]llowing [the post-loss assignment of insurance proceeds] hurts the insurer not at all . . . .  The assignment does not increase or decrease the financial exposure of the company in any way.”)

[4] Lexington Ins. Co. v. Simkins Indus., Inc., 704 So. 2d 1384, 1386 (Fla. 1998).