New 2019 AOB Laws Explained

New/Revised Florida Statutes and relevant changes for Restoration Companies

The Florida Legislature passed an Assignment of Benefits (“AOB”) reform bill, Florida H.B. 7065 (the “Bill”), which is expected to take effect July 1, 2019.  The Bill establishes 2 new section of Florida Statutes (§§ 627.7152 & 627.7153) and revises Fla. Stat. § 627.422, designed to curtail AOB practices, and is only applicable to AOBs executed on or after July 1, 2019.

What does this mean for restoration companies (the “Assignee”)? There is now specific requirements as to what must be included or excluded in an effective AOB, a strict record keeping requirement, as well as time-sensitive submission of AOB and related documents to insurance companies.

Fla. Stat. § 627.7152 Assignment Agreements

  • Assignees (a/k/a “Contractors”) will have to provide detailed estimates in advance of performing the work, promptly notify the Insurance Company of the AOB, and cooperate with the Insurance Company’s requests for information. Contractors will also need to see the policy prior to doing any work, in order to determine whether it’s possible to obtain an AOB and to determine the limit of the contract amount for urgent or emergency repairs.
  • Stat. § 627.7152(2)(a) outlines the requirements for a proper AOB, including, but not limited to, the following.:
    • The Assignor (a/k/a the named insured) must be given the right to rescind the AOB without a penalty or fee.
    • The Contractor must provide a copy of the executed AOB to the Insurance Company within 3 business days after the date the AOB is executed or the date on which work begins, whichever is earlier.
    • The AOB must contain a written, itemized, per-unit cost estimate of the services to be performed by the Contractor.
    • The AOB may relate only to work to be performed by the Contractor for services to protect, repair, restore, or replace a dwelling or structure or to mitigate against further damage to such property.
    • The AOB must contain a notice in 18-point uppercase and boldfaced type, warning the Assignor that they are giving up rights under their policy which may result in litigation against the Insurance Company.
    • The AOB must contain a provision requiring the Contractor to indemnify and hold harmless the Assignor from all liabilities, damages, losses, and costs, including, but not limited to, attorneys’ fees, should the insurance policy prohibit the AOB.
    • The AOB may NOT contain: (1) a penalty or fee for rescission; (2) a check or mortgage processing fee; (3) a penalty or fee for cancellation of the agreement; or (4) an administrative fee.
    • If an Assignor acts under an urgent or emergency circumstance to protect property from damage, a Contractor may not receive an AOB under a residential property insurance policy in excess of the greater of $3,000 or 1% of the Coverage A limit under such policy.
    • Any AOB that does not comply with these requirements is invalid and unenforceable.
  • If a Contractor fails to maintain records, cooperate with the Insurance Company, provide documents, or deliver a copy of the AOB within 3 days, Fla. Stat. § 627.7152(3) puts the burden on the Contractor to demonstrate that the Insurance Company is not prejudiced by a Contractor’s failure to do so.
  • The Contractor must provide the Assignor with accurate and current revised estimates as supplemental or additional repairs are required, and must perform work in accordance with industry standards. The Contractor cannot seek payment directly from the Assignor exceeding the deductible amount, unless additional work is being done at the Assignor’s request.
  • Acceptance of an AOB by a Contractor prohibits the Contractor and its subcontractors from pursuing payments directly from a named insured for services provided under the AOB. A named insured is only responsible for making payments to the Contractor for the deductible amount, any betterment ordered and performed that is approved by the Assignor, and any work performed before an AOB is rescinded.
  • In order to file a lawsuit against the Insurance Company,
    • The Contractor must, if requested by the Insurance Company: (1) submit to Examinations Under Oath and provide Recorded Statements, based on the services being provided, and (2) participate in Appraisal or Mediation if the policy requires it.
    • The Contractor must provide to the named insured (and Assignor, if not the named insured), and Insurance Company with written notice of intent to initiate litigation, at least 10 business days before filing suit, and but not before the Insurance Company makes a determination of coverage, which notice specifies the damages in dispute, the amount claimed, and a presuit settlement demand.
  • The Insurance Company, within 10 business days after receiving a Contractor’s presuit settlement demand, must provide the Contractor with the Insurer’s presuit settlement offer.
  • A Contractor’s ability to recover attorneys’ fees, or responsibility for paying attorney’s fees, depends on the judgment amount, the Insurer’s presuit settlement offer, and the disputed amount. The “disputed amount” is the difference between the Contractor’s presuit settlement demand and the Insurer’s presuit settlement offer.
    • If the difference between the judgment amount and the Insurer’s presuit settlement offer is:
      • Less than 25% of the disputed amount, the Insurer is entitled to attorneys’ fees.
      • Between 25%-50% of the disputed amount, no one is entitled to attorneys’ fees.
      • At least 50% of the disputed amount, the Contractor is entitled to attorneys’ fees.
    • In most circumstances, if an Insurance Company fails to provide authorization for the repairs within 7 days after the first notice of loss, the Insurance Company waives its rights to attorneys’ fees.

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