Assignment of Insurance Benefits: Non-Assignable Policies Provide New Way to Save on Property Insurance

In a previous article we introduced you to the sweeping statutory reform of Florida’s assignment of insurance benefits (AOB) laws. This reform was designed to limit the use of post-loss AOB agreements by insureds to assign their rights under an insurance policy to a third party. Home and business owners commonly used AOBs after a property loss to authorize a vendor, like a water remediation company, to collect payment for services rendered directly from the property insurance company rather than from the insured. But that was before various statutory reforms regulating the use of post-loss AOBs went into effect on July 1, 2019.

According to Office of Insurance Regulation, Florida’s property insurance market is being harmed by the abuse of post-loss AOBs. Individual policyholders, on the other hand, often benefit to some degree from having the freedom to enter into an AOB agreement. A homeowner with an overflowing toilet, for example, can sign an AOB agreement to get urgent water remediation services without going out-of-pocket instead of paying the bill upfront and waiting to be reimbursed later.

Though a collective approach to fixing the problem sounds good in theory, it’s hard to worry about the overall property insurance market when three inches of standing water is in your living room. Fortunately, those who are not willing to “take one for the team” may be able to keep the right to enter into post-loss AOB agreements…for a price.

As of July 1, 2019, Florida insurers have the option of offering residential and commercial property insurance policies that preserve, partially restrict or completely eliminate an insured’s right to enter into a post-loss AOB agreement. However, an insurance company may only offer polices that restrict the right to execute a post-loss AOB agreement in whole or in part IF:

• The insurer also offers coverage under a policy that does not restrict the insured’s right to execute a post-loss AOB agreement.
• Each restricted policy is available at a lower cost than the unrestricted policy.
• Policies prohibiting post-loss AOBs in whole are available at a lower cost than policies that prohibit them in part.

Each restricted policy must also include the following notice in boldfaced type: THIS POLICY DOES NOT ALLOW THE UNRESTRICTED ASSIGNMENT OF POST-LOSS INSURANCE BENEFITS. BY SELECTING THIS POLICY, YOU WAIVE YOUR RIGHT TO FREELY ASSIGN OR TRANSFER THE POST-LOSS PROPERTY INSURANCE BENEFITS AVAILABLE UNDER THIS POLICY TO A THIRD PARTY OR TO OTHERWISE FREELY ENTER INTO AN ASSIGNMENT AGREEMENT AS THE TERM IS DEFINED IN SECTION 627.7152 OF THE FLORIDA STATUTES.

Insurance companies must notify insureds of their restricted policy options at least annually. Insureds must reject fully assignable policies in writing or electronically using an approved form with the following boldfaced type heading: YOU ARE ELECTING TO PURCHASE AN INSURANCE POLICY THAT RESTRICTS THE ASSIGNMENT OF BENEFITS UNDER THE POLICY IN WHOLE OR IN PART. PLEASE READ CAREFULLY.

We don’t yet know which insurance companies may begin offering policies with restricted post-loss AOB rights, how these policies will read or how Florida’s property insurance market will react. We’ll let you know when we find out. Please contact us if you have any questions about Florida’s AOB reform.