Court stays consistent in recent Assignment of Benefits case

The 5th District Court of Appeal recently overturned a lower-court decision and ruled in favor of a contractor in a dispute with an insurance company in an assignment of benefits case.

Assignment of benefits ("AOB") cases involve a situation where a property owner who has sustained damage to their property, hires a contractor to mitigate the damages and then assigns their right under their insurance policy to the contractor.  See AOB December 5, 2017 post discussing in further detail AOB claims.

The contractor will make a claim directly with the insured property owners insurance company through their AOB.

In this particular case, the insurance company was arguing that the insured property owner needed to get permission from their mortgage company to be able to assign their benefits under their insurance policy.

The main problem with that argument is that in the case of property damage, the insured property owner needs to be able to get professional help immediately to prevent further damage to the property.  If their property has a mortgage, having to get approval from their mortgage lender could take days or even weeks, which would cause greater damage to the property and more cost to repair.

The 5th District Court of Appeal reject the insurance company's argument and said that AOBs could not be restricted by requiring mortgage company approval.  The appellate court stated that any post-loss assignment restriction is against Florida law.

Again, this is a situation where the Florida Legislature will have the final say regarding AOB claims, but this decision is a victory for insured property owners who want to make sure they can take quick action to protect their property when it sustains damage.

National Flood Insurance Program extended to March 23, 2018

Good news for property owners and potential property owners: Congress has decided to extend the National Flood Insurance Program through March 23, 2018.

This is a big deal because many prospective property owners are in need of obtaining flood insurance or renewing it.

First, if you are a prospective property owner who is seeking financing, and the property you are looking to acquire is in a flood zone, the lender will probably require that you get flood insurance as a way to partially secure their loan on the property.

Additionally, if you are already a property owner and your policy renewal is coming up, it is also imperative that it be renewed so that you do not have any lapse in coverage.

Many of us witnessed firsthand the devastation a natural disaster like Hurricane Irma can have on our properties, and this measure by Congress assures that property owners will have the ability to get flood insurance through the National Flood Insurance Program and not have to solely rely on private flood insurance.


National Flood Insurance Program extended through December 22, 2017

As a follow up to a previous post, and a move that was anticipated by most, Congress has decided to extended the Federal flood insurance program for two weeks through December 22.

The short-term fix will in theory buy lawmakers some time to propose a longer-term re-authorization of the program. 

It is still to be determined whether the two week extension will provide enough time for the federal government to implement a re authorization.

What is clear is that a gap in the coverage period of the program could prove disastrous, especially in coastal cities, or areas where real property lies close to a body of water.

Not to mention the potential issue of anyone attempting to secure a federally-back mortgage, which requires properties in a flood zone to obtain flood insurance.

Only time will tell how this will play out, but the implications are looming. 

Federal flood Insurance set to expire Friday December 8, 2017

If you are a person who is closing on a federally-backed mortgage, and whose property is in a flood zone, you are required to obtain flood insurance.  That flood insurance is provided by the National Flood Insurance Program ("Program").

This Program is currently set to expire this Friday December 8, 2017.

While this Program expires again this Friday, chances are that it gets temporarily extended for another six months to a year. 

However, the tougher question is whether the program will receive a long-term re authorization to continue in effect. 

Opponents of the Program point to the $25 billion in debt the program was sustaining prior to hurricanes Harvey and Irma, due to paying out claims in excess of premiums received.

Proponents of the Program state that the necessity to provide disaster relief and help for people in need and for insuring the estimated $64 trillion of properties at risk.

Ultimately the legislature will need to fashion a compromise between these two sides.




Florida 5th District Court of Appeals rejects insurer assignment of benefits restriction

The 5th District Court of Appeal recently issued an opinion which upheld a decision by the state Office of Insurance Regulation ("OIR") rejecting restrictions proposed by insurer. Sec. First Ins. Co. v. Fla. Office of Ins. Reg., No. 5D16-3425, 2017 Fla. App. LEXIS 18083 (5th DCA Dec. 1, 2017).

This is a case that had to do with assignment of insurance benefits.  The way an assignment of benefits works in a property damage context, is the policyholder/insured would sign over their benefits to contractors, who perform repairs, mitigate damages, and ultimately pursue payments from the insurance companies directly.

Insurance companies have complained that the assignment of benefits to contractors have driven the costs of claims, but others argue that it helps policyholders hire contractors quickly and forces insurance companies to properly pay claims.

In this case the insurer Security First Insurance Co. was attempting to add language to their property insurance policies that would in part require assignment of benefits to have written consent from policyholders and their mortgage lenders.

The Court found that restriction was prohibited under Florida law and that an insured can freely assign their right to recover after a loss. Id.

The Court also said that this was a matter that the legislature is better equipped to handle, and this is surely not the last we have heard of the assignment of benefits debate. 

Property Insurance- Difference between water and flood damage

Picture this: you are walking into your property one day to find that the ground is filled with water.  

The first question you may be asking yourself is how did this happen? More importantly, will my insurance cover this damage?

The answer to that question, just like most in the law is the dreaded "it depends". 

There are two different types of property insurance policies that cover losses caused by water.  The first is homeowners insurance and the second is flood insurance.

Homeowners insurance. Generally speaking, most homeowner policies cover damage to the property caused by a sudden and accidental water event.  Examples of this may include a burst pipe, or a wind/storm-driven rain.

Flood insurance. This type of insurance covers a very specific type of water damage; one caused by a rising or overflowing body of water onto normally dry land. Typically a partial or complete inundation of a certain area of normally dry land by inland/tidal or surface waters will qualify as a flood.  This can be seen in situations where a property is located near a body of water such as a river, lake, wetland, or ocean which overflows and causes inundation of the property.

So as you can see, these two different types of property insurance complement each other as they provide coverage for different causes of water damage.

As such, the first step to determining whether the damage is covered would include analyzing the type of insurance coverage that you have, and the source of your water damage.

Post Hurricane Irma Property Damage

Even though Hurricane Irma was a major storm that caused damage throughout the state, Floridians are getting some good news, courtesy of Governor Rick Scott.

Governor Scott issued an executive order on Tuesday September 12, 2017, which directs and authorizes the Florida Insurance Commissioner to take the following steps to protect Floridians filing property damage claims:

  1. Provides additional ninety (90) days for policyholders to supply required information to their insurance company;
  2. Require all non-renewal or cancellations issued to policyholder in the days leading up to Hurricane Irma to be retracted (reversed) for 90 days, giving policyholders 90 days to either renew or find a new policy; and
  3. Freeze all efforts to increase rates on policyholders for 90 days.

One of the most obvious benefits to this executive order, is it provides policyholders (property owners with a property insurance policy) more time to provide information that the insurance company requires to asses a claim.  Many people evacuated their properties, and so it is logical that it will take them more time to get their affairs and documentation in order.

With respect to reversing any non-renewals or cancellations, it provides Floridians with another opportunity to renew their property damage coverage, or to obtain a new policy, without losing coverage during the time it was canceled or not renewed.

Lastly, the order to freeze all efforts to increase rates sends a strong and clear signal to insurers not to penalize policyholders for submitting property damage claims.


Hurricane Irma post Property Assessment 

Hopefully you are like the majority of Floridians who took the necessary precautions and remained safe during the pendency of this massive storm.

While you start to asses any potential damage to your property, here are a few things to keep in mind BEFORE you contact your property insurance carrier to make a claim:

  1. It is important to do a throughout visual inspection to asses whether your property sustained any damage (be aware that generally speaking, most property insurance policies protect the structure of your property, and not the outside yard or trees);
  2. If your property did in fact sustain damage, and that involves water damage, be sure to contact a water remediation company, to mitigate further damage that water can cause including, but not limited to mold;
  3. If your property sustained structural damage, and staying in that property may cause you danger, your insurance policy may cover relocation expenses.
  4. While you are mitigating damages, also be sure to contact a public adjuster to help asses your claim and to provide you and your insurer with an estimate of the damage;
  5. Your public adjuster will initially handle your claim, but if your insurance company is denying coverage, or underpaying the value of your claim, it may be time to consider hiring an attorney to litigate your claim.

Unfortunately, this storm has affected countless individuals and businesses in South Florida. We are hopeful that together we can rebuild and continue to move forward in the wake of this storm.

FinCEN reporting change governing residential real estate transactions

There are new reporting changes on the horizon for residential real estate transactions.

FinCEN (short for the Financial Crimes Enforcement Network) originally initiated an initiative to uncover people laundering money through real estate back in January 2016.

The initiative has been amended a few times since then and currently includes a Geographic Targeting Order (“GTO”), which requires collection and reporting of information about persons involved in certain residential real estate transactions in the following jurisdictions: South Florida counties of Miami-Dade, Broward and Palm Beach; all five boroughs of New York City; San Antonio, Texas; Honolulu (included in the order for the first time); and Los Angeles, San Diego and San Francisco.

The GTO covers the following real estate transaction that meet all of the following criteria:

  1. The transaction involves residential real estate in Miami-Dade, Broward or Palm Beach Counties in Florida.
  2. The purchase price is $1 million or more.
  3. The purchaser is a corporation, limited liability company (LLC), partnership, or other similar legal entity. (The definition does not include natural persons or trusts.)
  4. The purchaser purchases the real estate without a bank loan or other similar form of external financing.
  5. The purchaser pays any part, including a deposit, of the purchase price using currency, or a cashier's check, certified check, traveler's check, personal check, business check or money order. (Transactions fully paid for with wire transfers are NOW Covered Transactions and require reporting!)

As shown above, the biggest change in the GTO initiative is that wire transfers are now covered, whereas before they were not.

The reason this is a big change is because the majority of real estate transactions, at least as far as those involving title insurance is concerned, are completed with wire transfers.

If you are involved in real estate in any way, either as a professional, or as an individual looking to buy or invest, this is an initiative you need to be aware about.

This initiative places the obligation on the title underwriter, and its closing agents, to report any covered transactions under the GTO.

The new GTO is expected to be effective September 22, 2017.  The current GTO expired on August 22, 2017.  Transactions between August 23, 2017 through September 21, 2017 do not have to be reported to FinCEN.

What is an AOB claim in Property Insurance Context?

An assignment of benefit (“AOB”) is a common mechanism used by contractors for water mitigation services, which are emergency remediation services usually contracted for water damage.

Generally speaking every homeowner with a property insurance policy has a duty to mitigate the property damage.

Hiring professionals to assist with that process is very common and useful, especially in emergency situations where water damage is involved.

The water mitigation contractors have the policyholders assign their benefits for payment of that particular claim so that the contractors can stand in the shoes of the insured, and make a claim directly with the insurance company.

This arrangement benefits both parties in that the insured does not have to worry being responsible for having the initial costs of the water mitigation services, and it allows the contractor to seek reimbursement directly from the insurance company.

Insurance companies have for the past few years discouraged the use of this practice because of what they claim is rampant fraud by contractors in inflating costs for non-storm claims such as water damage from a leaky pipe.

As I mentioned in my previous post, there certainly is some abuse of AOB claims, but I believe that is in the minority of cases.

Insurance companies as a result have proposed and some, such as Citizens Property Insurance Corp., will be increasing their annual premiums for South East Florida. 

Unfortunately the increased premiums will probably be felt by policyholders for the next years to come.