Analysis and Interpretation by Michael A. Cassel 

Previously, on April 15, 2015, we reported on the Fifth District Court of Appeals of the State of Florida (“5th DCA) decision in Accident Cleaners, Inc., a/a/o Joseph Gerena v. Universal Insurance Company, Etc., which dealt with the insurable interest a mitigation company holds with regards to a post-loss assignment of insurance rights and benefits.  As discussed therein, there were three (3) cases pending before the Fourth District Court of Appeals of the State of Florida (“4th DCA”) dealing with similar issues that could shed additional light on defenses available to insurers with regards to post-loss assignments. 

On May 20, 2015, the 4th DCA released their decision in One Call Property Services Inc. a/a/o William Hughes (hereinafter “One Call”) v. Security First Insurance Company (hereinafter “Security First”), Case No. 4D14-424, Fla. App. LEXIS 7643 (Fla. 4th DCA 2015).ⁱ  The One Call court dealt with the application of the anti-assignment clause and loss payment provision contained within the insurance policy as it pertained to an after-loss assignment of benefits to a mitigation company.  

Post-Loss Assignment of Insurance Rights and Benefits, Part 2  

Previously, on April 15, 2015, we reported on the Fifth District Court of Appeals of the State of Florida (“5th DCA) decision in Accident Cleaners, Inc., a/a/o Joseph Gerena v. Universal Insurance Company, Etc., which dealt with the insurable interest a mitigation company holds with regards to a post-loss assignment of insurance rights and benefits.  As discussed therein, there were three (3) cases pending before the Fourth District Court of Appeals of the State of Florida (“4th DCA”) dealing with similar issues that could shed additional light on defenses available to insurers with regards to post-loss assignments. 

On May 20, 2015, the 4th DCA released their decision in One Call Property Services Inc. a/a/o William Hughes (hereinafter “One Call”) v. Security First Insurance Company (hereinafter “Security First”), Case No. 4D14-424, Fla. App. LEXIS 7643 (Fla. 4th DCA 2015).ⁱ  The One Call court dealt with the application of the anti-assignment clause and loss payment provision contained within the insurance policy as it pertained to an after-loss assignment of benefits to a mitigation company.  While the One Call court upheld the long standing maxim that post-loss assignments are appropriate, it also provided language which will assist insurers in the defense against mitigation companies in claim where coverage has been otherwise denied.

Background

In One Call, the insured, William Hughes, entered into an assignment of benefits with One Call after allegedly sustaining a loss at his property.  Due to an alleged refusal by Security First to reimburse One Call for the mitigation services rendered, One Call filed a lawsuit (ostensibly alleging a breach of contract).  In the filing of their complaint, One Call did not attach a copy of the policy but stated that same would be obtained “through the discovery process.”  One Call at 2. 

Security First then filed a motion to dismiss alleging that One Call lacked standing to bring their lawsuit, in part due to the anti-assignment clause and loss payment provision contained within the insurance policy.  In support of their motion to dismiss, Security First attached a copy of the insurance policy as an exhibit.  In One Call’s response to the motion to dismiss, One Call argued that the motion impermissibly went beyond the four corners of the complaint and asserted various reasons for upholding the validity of the assignment.  Ultimately, the trial court sided with Security First and entered an order dismissing the complaint with prejudice.

4th DCA Opinion

On a procedural note, the One Call opinion states that “where the terms of a legal document are impliedly incorporated by reference into the complaint, the trial court may consider the contents of the document in ruling on a motion to dismiss” and, accordingly, it was not improper to consider the insurance policy in the motion to dismiss as same was incorporated by reference in the complaint.  As such, any documents, e.g., the policy or the “assignment of benefits” contract, can be utilized in a motion to dismiss when said documents are referenced in the complaint.

In looking at the basis for dismissal pertaining to the anti-assignment clause, the 4th DCA reversed the trial court’s ruling stating that the lower court erred in dismissing the One Call’s complaint based on the anti-assignment clause and loss payment provision of the governing insurance policy.  This analysis was based on long-standing Florida law that “the provision in a policy relative to the consent of the insurer to the transfer of an interest therein does not apply to an assignment after loss.”  One Call at 7 quoting W. Fla. Grocery Co. v. Teutonia Fire Ins. Co., 74 Fla. 220, 224, 77 So. 209, 210-11 (1917). 

Additionally, the 4th DCA shot down Security First’s reliance on the loss payment provision stating that “a standard loss payment provision in an insurance policy does not preclude an assignment of a post-loss claim, even when payment is not yet due.  The loss payment clause merely addresses the timing of the payment and expressly contemplates that a lawsuit could occur before payment is due.”  One Call at 10 cf. Curtis v. Tower Hill Prime Ins. Co., 154 So. 3d 1193 (Fla. 2d DCA 2015).  The One Call court further held that “an assignable right to benefits accrues on the date of the loss…”  One Call at 11. 

The One Call court also held that a post-loss assignment cannot be invalidated on the theory that it assigns a contractual duty to adjust in violation of the loss payment provision which states, in pertinent part, that “[w]e will adjust the loss with you.”  The court reasoned that the insured does not determine the amount that the insurer will pay to cover a loss nor does the insured fit within the definition of an “adjuster.”  Furthermore, as the duty to adjust is a part of the loss payment provision and is not part of the insured’s “Duties After Loss,” there is no duty imposed on the insured that the insured need comply with.

Impact and Effect

Quite frankly, as previously articulated, based on the precedent set in West Florida Grocery, it is unclear as to why the One Call trial court strayed from the well-established law regarding anti-assignment clauses.  There is, however, a proverbial “light at the end of the tunnel” with regards to the 4th DCA’s analysis in One Call.  Previously, in Shaw v. State Farm, the 5th DCA held that “[i]f no monies are due and owing because of the failure of [the insured] to perform some covenant under the policy… then [the assignee] has no claim against [the insurer], precisely because it is subject to [the insurer]’s defenses against the insured.”  Shaw v. State Farm Fire & Cas. Co., 37 So. 3d 329, 333 (Fla. 5th DCA 2010).  The One Call court cites to the Shaw opinion when stating that “as long as the insured complies with all policy conditions, a third-party assignee may recover benefits on a covered loss.”  One Call at 13 [emphasis added].  As such, the One Call opinion further solidifies that an assignee’s rights to insurance proceeds are still reliant on the insured’s compliance with the post-loss conditions outlined in the policy. 

Furthermore, we may read deeper into the One Call opinion and deduce that an assignee may only recover benefits from an insurance company in claims where coverage has first been afforded to the insured.  This is further augmented by the fact that “a loss payee can only recover to the extent the named insured can recover.”  Transamerica Leasing, Inc. v. Inst. of London Underwriters, 267 F.3d 1303, 1307 (11th Cir. Fla. 2001); see also Couch on Insurance § 65:22 (3d ed. 1996) ("Loss payee's rights under insurance policy are derivative of named insured's rights; when named insured has no right to recover, loss payee cannot recover under policy.").  Coupled with the provisions contained within most (if not all) assignment contracts allowing for the assignee to obtain payment from the assignor in the event of a denial of insurance coverage,ⁱⁱ an insurer’s defense against payment to an assignee in a wholly denied claim may be more viable than ever.  

Footnotes

ⁱ It must be noted that the 4th DCA also released its two (2) concurrent opinions in Emergency Servs. 24, Inc. v. United Prop. & Cas. Ins. Co., 2015 Fla. App. LEXIS 7633 (Fla. 4th DCA 2015) and ASAP Restoration & Constr., Inc. v. Tower Hill Signature Ins. Co., 2015 Fla. App. LEXIS 7624 (Fla. 4th DCA 2015) which dealt with similar issues regarding the anti-assignment clause and loss payment provision; however, both concurrent opinions cite directly to the Hughes opinion as bases for the decisions reached. 

ⁱⁱ Both the instant case and the two (2) concurrent opinions refused to discuss either side of the public policy considerations raised by the assignment of insurance benefits to contractors for emergency repairs after a loss.  The 4th DCA stated that “[i]f studies show that these assignments are inviting fraud and abuse, the legislature is in the best position to investigate and undertake comprehensive reform.”  One Call at 14.