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Fight Over Home Insurance Payouts Floods Into Florida Supreme Court

Jessica Palombo
Workers rescue cats from a San Marco home as floodwaters rise following Hurricane Irma in 2017.

Amid continuing political and legal battles about the insurance practice known as “assignment of benefits,” the Florida Supreme Court has agreed to take up a closely watched case stemming from water damage to a St. Lucie County home.

The Supreme Court’s decision Thursday to hear the case could lead to resolving a conflict in lower courts about a restriction that insurers have tried to place on assignment of benefits. In a somewhat-unusual circumstance, attorneys on both sides of the St. Lucie County case asked the Supreme Court to take up the case and resolve the conflict.

Assignment of benefits, or AOB as it is widely known, has been one of the most-controversial insurance issues in the state Capitol in recent years and is expected to spur a fight during the 2019 legislative session. In assignment of benefits, homeowners in need of repairs sign over benefits to contractors, who ultimately pursue payments from insurance companies.

Insurers argue that the process has become riddled with fraud and litigation, driving up insurance rates. On the other side, contractors and trial attorneys contend that assigning benefits helps homeowners hire contractors quickly to repair damage and forces insurers to properly pay claims.

Much of the controversy has centered on water-damage claims for homes in South Florida, though it also involves other parts of the state and issues such as claims for damage to car windshields.

The St. Lucie County case focuses on a breach-of-contract lawsuit filed by the firm Restoration 1 of Port St. Lucie against Ark Royal Insurance Co. Policyholders John and Liza Squitieri sustained water damage to their home, and Liza Squitieri contracted with Restoration 1 of Port St. Lucie to do cleanup work and assigned the benefits to the firm, according to a September ruling by the 4th District Court of Appeal.

Ark Royal, however, refused to pay the full amount requested by the restoration firm, pointing to an insurance contract that required approval from the husband, wife and the Squitieris’ mortgage company, PNC Bank, for benefits to be assigned to the contractor. Restoration 1 sued the insurer for breach of contract but lost in circuit court and the 4th District Court of Appeal.

The 4th District Court of Appeal decision, however, conflicted with an earlier ruling by the 5th District Court of Appeal in a case that also focused on whether an insurer could require approval of mortgage companies and all people insured in policies before benefits could be assigned.

Security First Insurance Co. took the case to the 5th District Court of Appeal after the Florida Office of Insurance Regulation rejected a company proposal to add such AOB restrictions to policies. A panel of the appeals court upheld the position of the Office of Insurance Regulation. The 5th District Court of Appeal also reached a similar conclusion in a later case involving ASI Preferred Insurance Corp.

As is common, the Supreme Court on Thursday did not explain its reasons for agreeing to take up the St. Lucie County case. But in briefs filed in October, attorneys for Ark Royal and Restoration 1 pointed to a need to resolve the conflicting lower-court rulings.

“The exact same restrictive assignment language appears in each of the policies issued by Ark Royal, Security First Insurance Company, and ASI Preferred Insurance Corporation,” attorneys for Restoration 1 wrote. “Therefore, the conflicting decisions impact multiple insurance companies, insureds and assignees throughout the state. Thus, this (Supreme) Court should resolve the conflict and provide unity among the districts for insureds, insurers, mortgagees and assignees.”