Mortgage holders seek veto power

Insurance industry wants a say in hiring repair contractors

Should you be required to get your mortgage lender’s permission to assign your home insurance claim to a repair contractor of your choice?

Florida’s insurance industry says “yes” in a dispute that’s landed on the steps of the state Supreme Court.

The high court hasn’t yet agreed to hear the case. But the lead attorney for the insurer in the case says a ruling favorable to his client would enable the industry to reduce outof-control, claims-related costs that are driving up insurance premiums for all South Florida homeowners.

But his opponent, representing a repair contractor, warns that the court risks opening a can of worms that could drag mortgage companies into untold numbers of insurance disputes.

It’s the latest battle in the industry’s war against “assignment of benefits” — the right of homeowners to assign damage claims to third-party repair contractors who can then “stand in their shoes” to invoice insurers and file suit if those insurers fail to pay.

Insurers say claims outlays and litigation costs have skyrocketed in the decade since a handful of plaintiff’s attorneys started teaching repair contractors how to use claims assignments to their advantage.

Nearly one in four of all South Florida water damage claims submitted to private-market insurers in 2017 were submitted by contractors as assigned claims, according to data collected by the state Office of Insurance Regulation. Among South Florida water damage claims submitted to state-run Citizens Property in 2017, nearly one in three were assigned, Citizens data shows.

Over the past five years, insurers and their allies in the Florida Chamber of Commerce and insurance commissioner’s office have gone to war over the issue but have little to show for their efforts.

Courts have consistently ruled that insurers cannot restrict their customers’ right to assign their claims, and the state Legislature has refused to enact bills that would allow insurers to impose restrictions.

In December 2017, the Fifth District Court of Appeal in north central Florida ruled that Security First Insurance could not require policyholders to seek the insurer’s approval to assign a claim. The court said the requirement sought by Security First was prohibited under a common law rule established by the state Supreme Court in 1917, barring insurers from restricting the postloss transfer of a benefit.

A ruling on Sept. 5 by the Fourth District Court of Appeal, which decides cases in Palm Beach, Broward, St. Lucie, Martin, Indian River and Okeechobee counties, addressed a slightly different approach by insurer Ark Royal: After a repair company submitted a $20,306 invoice for repairs at a consumer’s home, Ark Royal declined to pay the full amount, saying the assignment was not signed by the customer’s mortgage-holder as required by language in the customer’s policy.

The repair company, Restoration 1 of Port St. Lucie, sued Ark Royal, arguing that requiring a mortgageholder to approve a claims assignment violated the 1917 ruling.

The circuit court agreed with the restoration company. Ark Royal appealed and found a more sympathetic ear in the Fifth District, which found the 1917 ruling did not apply because the policy language in question did not require consent of the insurance company. It required consent of the mortgageholder which, the court found, had a “vested interest” in having a reputable contractor repair the home.

Recognizing that the two rulings conflict with each other, both parties in the case have asked the state Supreme Court to review it. A decision could take more than a year, said Scott Millard, lead attorney for Restoration 1.

Insurers hoping the case presents a solution to the assignment of benefits issue are waiting to see how the high court decides.

Barry Gilway, president and CEO of state-run Citizens Property Insurance Corp., told the company’s