Archive: July 2019

A new assignment of benefits (AOB) law that came into effect here in Florida in July alters the practice of policyholders assigning third-party claim benefits of an insurance policy and could very well change the insurance litigation landscape in Florida.

The Bill’s Provisions

Prior to now, the combination of this practice with Florida’s one-way attorney fee statute allowed policyholders to recover attorney’s fees from an insurer.  However, the new law that went into effect establishes a number of requirements when it comes to assignment agreement, including:

Purpose & Effect

According to the legislators behind it, the law was passed in response to a decade of “abusive litigation tactics in Florida’s market.” However, the bill has been labeled a “consumer protection measure,” passed in response to a policyholder benefit that has caused higher rates for Florida property owners.

According to some sources, AOB lawsuits have exploded in recent years – especially in South Florida – leading to some insurers to increase rates for most-all of its homeowner’s policyholders to offset litigation expenses. That being said, insurers have also cited the fact that three hurricane seasons in a row have created certain unavoidable obstacles when it comes to elevated insurance rates. In addition, it is important to note that the insurance industry is celebrating this as a legislative victory, and while they expect a reduction in AOB litigation, they do not expect an overall reduction in insurance litigation.

An important insurance litigation decided by the 11^th Circuit (Florida) during the second week of March laid the foundation for when insurance companies can determine whether they can indemnify their policyholders.

At Issue in the Case

The case involved an appeal of a district court decision finding that Mid-Continent Casualty Company (MCC)’s complaint for declaratory relief regarding whether it had a duty to indemnify one of its insureds in a pending lawsuit was not yet ripe for adjudication until the underlying lawsuit was resolved because the company’s duty to indemnify depends upon the resolution of that underlying lawsuit.

Rule, Analysis, & Conclusion

MCC had issued a number of insurance policies to a Florida construction company (Delacruz) that built single-family homes. As part of those policies, MCC was obligated to defend and indemnify Delacruz under certain conditions if they are sued for defective construction. Once the project was completed, a number of homeowners sued the general contractor that hired Delacruz for defective construction. The general contractor then turned around the sued Delacruz and its subcontractors for breach of contract, common law indemnity, contractual indemnity, Florida building code violations, and negligence. MCC sought a declaration in court that it is not obligated to indemnify Delacruz, claiming that the alleged defective construction claims fell outside of the policy limits they set on Delacruz, and the District Court ruled that the duty to indemnify was not yet ripe for adjudication because the underlying lawsuit (i.e. the general contractor’s lawsuit against Delacruz) was not yet resolved. In other words, before MCC’s motions can be resolved, Delacruz’ liability has to be established.

Given the devastation caused by hurricane Michael to Florida last October, there is still plenty to be done, especially as a number of property owners are still waiting for their insurance companies to ‘make them whole’ in terms of their losses. In an effort to provide some relief to affected Florida property owners, on April 16, Florida state lawmakers moved legislation that aims to provide assistance to Floridians that are still recovering from the hurricane. Specifically, Senate Appropriations approved two bills to provide assistance in debris removal, housing, infrastructure, and other necessary repairs.

Funds Set Aside for Hurricane Recovery

One provision would also create a $300 million program of “rainy day” funds for local governments and school boards, allowing them to prioritize funds for housing needs, task forces to oversee recovery efforts, and improving building codes.

If the bills are implemented, total Florida state commitment on Hurricane Michael recovery would come to almost $2 billion. In addition, another bill that was approved on April 16 would take some funds set aside for the 2010 Deepwater Horizon oil spill and allow them to, instead, be used for hurricane recovery needs. The measure would direct the state Department of Economic Opportunity to designate a number of recovery infrastructure project priorities, especially in counties such as Calhoun, Jackson, Liberty, Jefferson, Holmes, Jackson, Gadsden, and Washington.