Assignment of Benefit Contracts: To Assign Or Not To Assign

After all major natural disasters here in Florida over the last few years, one area of law has garnered much attention from insurance companies and construction companies – Assignment of benefits. An Assignment of Benefit, or “AOB”, is a contract that a homeowner typically makes with a contractor to assign the homeowner’s claim against the homeowner’s insurance company. This process has spurned large amounts of criticism from the insurance lobbyists and homeowner’s alike.

Based on the rise in recent litigation, insurance lobbyists have successfully obtained AOB reform. While there are many changes to the AOB laws that are set to go into effect on July 1, 2019, there are three big changes everyone should be aware of:

  1. Cooling off period
  2. Pre-Suit mediation
  3. Fee shifting

Cooling Off Period

Under the new law that goes into effect on July 1, 2019, all AOB contracts must be cancellable by the homeowner. The time periods in which the homeowner may cancel an AOB contract varies depending on the situation. However, all AOB contracts can be canceled within 14 days after signing the agreement. This cancellation is the absolute right of the homeowner and no penalties or fees may be assessed to the homeowner by exercising this right to cancel. This provision is excellent for homeowners as it gives them time to review the contract during a less stressful moment in time after signing, as opposed to standing in the living room of their home in ankle deep water.

Pre-Suit Mediation

Unlike prior versions of Florida’s AOB law, after July 1, 2019, all contractor’s seeking to file suit against the insurance company must give at least ten (10) business days written notice to the insurance company prior to filing any suit under the AOB contract. In the notice, there must be a claim of damages, the number of disputed damages, and a pre-suit settlement demand. After receipt, the insurance company must respond to the pre-suit demand letter within ten (10) business days and offer a settlement, demand appraisal of the repairs made, or offer an alternative dispute resolution process. However, assuming that none of the above methods are fruitful, a lawsuit may be filed.

Shifting the Attorney’s fees

Arguably the biggest change with Florida’s AOB Law is shifting attorney’s fees within the law itself. The new law will compare any judgment obtained against the pre-suit settlement demand. Under the prior version of the statue, only in rare instances would an insurer be able to recover their attorney’s fees against a suing contractor. However, under the new law, if a suing contractor does not recover at least 25% of the disputed amount, the contractor will be responsible for paying the insurer’s attorney’s fees. If the recovery is at least 25% but less than 50% of the disputed amount, no party receives an award of attorney’s fees. If the recovery is at least 50% of the disputed amount, the insurer is responsible for paying reasonable attorney’s fees. This fee-shifting provision is a large change to a historical plaintiff attorney’s fee-friendly statute that the insurance lobby hopes will help curb much of the current AOB litigation that is pending in the State of Florida.

Florida’s Homeowner’s are more Protected

While the above is not an expansive list of the changes to Florida’s AOB laws, it is the highlights. The biggest win for Florida’s homeowners is the ability to unilaterally cancel the AOB contract within 14 days of execution without any financial penalty. While there are many other situations that will allow insured’s to cancel AOB contracts, contacting an experienced attorney to help you navigate this process is highly recommended.

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