Florida AOB Reform Statute Does Not Retroactively Apply

Assignment of Benefit (“AOB”) agreements have been a highly controversial issue in Florida over the past year, with much of that controversy stemming from what is now commonly known as the Florida AOB Reform Act.

On May 23, 2019, Florida Governor Ron DeSantis signed House Bill 7065, which is now Laws of Florida Chapter 2019-57 (“Act”). This Act amended Florida Statutes §627.422 and created Sections 627.7152 and 627.7153, which includes multiple provisions imposing significant new requirements on assignment agreements executed under residential and commercial property insurance policies.

An AOB is an agreement that transfers the insurance claims rights or benefits of the policy to a third party. This agreement gives the third-party authority to do things such as file a claim, make repair decisions, and collect insurance payments without the involvement of the policyholder. Like most issues involving an assignment of rights, there are differing perspectives as to the utility of AOB agreements in context of property insurance policies. In her blog post, Florida’s AOB Reform Bill Became Effective July 1, 2019: How Does This Affect Me?, Merlin Law Group attorney Beaujeaux de Lapouyade explained:

AOBs affect claim adjustments, take away important rights from policyholders, and can play a role in higher premiums. Nevertheless, AOBs can also provide stress relief to policyholders, affect the way contractors conduct business, and often guarantee payment to contractors for services rendered. The Florida Legislature finally decided to play ball on this hotly debated topic.

The statutory provisions contained in §627.7152 established a multitude of new requirements for a valid AOB and changed the fee-shifting framework for attorney’s fees in AOB suits. These new requirements pose a significant issue with respect to existing AOB agreements; specifically, whether §627.7152 may be applied retroactively to policies and the corresponding agreements executed prior to the Act’s effective date. Since July 2019, insurance carriers have attempted to use the more technical requirements contained in the AOB statute to invalidate the agreement and dismiss any related lawsuit. Similarly, insurers have attempted to avoid their obligation to pay attorney fees otherwise owed under Fla. Stat. §627.428.

As described by Merlin Law Group attorney Ashley Harris in her blog post, Does Florida’s AOB Statute Apply to My Assignment Agreement?, the attempt to invalidate those AOB agreements where the policy was entered into prior to the statute’s enactment goes against established Florida precedent:

[T]he Supreme Court of Florida in Menendez v. Progressive Express Insurance Company, Inc., held that a very similar statutory scheme could not apply retroactively to insurance policies issued before the statute was enacted. This 2010 case concerned a personal injury protection (PIP) benefits presuit notice requirement. However, state and federal courts across Florida agree with the reasoning in Menendez and its application to the AOB statute.

This concept has proven correct in at least one recent Florida decision. On December 16, 2020, in SFR Services, L.L.C. v. American Integrity Insurance Company of Florida,¹ the Circuit Court of the 20th Judicial Circuit was presented with a similar argument by the carrier attempting to apply the AOB statute to a policy entered into prior to the Act’s effective date. The insurer, American Integrity Insurance Company of Florida, filed a motion to dismiss alleging that the Plaintiff failed to satisfy the stringent technical requirements contained in Fla. Stat §627.7152.

The court ultimately denied the motion, stating:

The Court finds that both pre-suit requirements and attorney’s fees and costs are substantive rights pursuant to Menendez v. Progressive Exp. Ins. Co., Inc., 35 So. 3d 873 (Fla. 2010). Substantive rights cannot be changed retroactively. This Court notes that the date of the loss at issue in this litigation occurred on a date prior to the date that Fla. Stat 627.7152 became effective. The Court notes that the law that was in effect when the Policy was entered into would apply to the assignment of benefits contract at issue in this litigation. As such, Fla. Stat 627.7152 is not applicable to the assignment of benefits contract attached to Plaintiffs Complaint.

The court also discussed the carrier’s ability to dispute the validity of the assignment agreement.

The Court notes that as a party not in privity with the assignment contract, Defendant has a limited ability to challenge the validity of the assignment of benefits contract, or whether there was adequate consideration supporting the assignment contract.

This latest decision accurately represents the position taken by most Florida courts: Fla. Stat §627.7152 does not apply retroactively to claims where the policy was entered into prior to the Act’s effective date. A similar decision was reached in Castilla Roofing, Inc. v. Hartford Insurance Company of the Midwest.² In this case, the Defendant insurance company filed a motion to strike the contractor’s claim for attorney’s fees under Fla Stat. §627.428. Although the court in Castilla Roofing did not directly address the effective date of the Act, the court did describe when the agreement was “unquestionably” governed by Fla. Stat. §627.428 as opposed to §627.7152.

Defendant alleges the insurance policy was effective from March 30, 2016 through March 30, 2017. (Citation omitted). Therefore, the issuance of the policy certainly predated May 24, 2019… Likewise, the date the assignment agreement was entered into, April 30, 2019, also predates May 24, 2019. (Citation omitted). Therefore, whether the relevant date is the date the policy was issued or that date the assignment agreement was entered into, any claim for attorney’s fees in this case is still unquestionably governed by Fla. Stat. § 627.428.³

While the decision in SFR Services is a more straightforward and definite holding (the law that was in effect when the Policy was entered into would apply to the assignment of benefits contract at issue), it should once again be emphasized that these decisions do not invalidate the new AOB reform statute. Contractor’s and those subject to an AOB should still be sure to comply with each provision of §627.7152. Assignees must continue to look at the policy in effect at the time of the loss and determine whether that policy was issued on or after the effective date of the statute. Assuming the appellate courts agree with holdings such as that in SFR Services, courts will continue to find that §627.7152 does not apply retroactively to AOB agreements based on policies entered into prior to the Act’s effective date.
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¹ SFR Services, L.L.C. v. American Integrity Ins. Co. of Florida, No. 2020-CA-005940 (Fla. Cir. Ct. – 20th Judicial Cir. Dec. 16, 2020).
² Castilla Roofing, Inc. v. Hartford Ins. Co. of the Midwest, No. 2:19-cv-613 (M.D. Fla. Jan. 30, 2020).
³ Castilla Roofing, at 6, 7.