Oftentimes policyholders that have suffered a loss turn to representatives that will be able to help them in emergency situations. These companies may take assignments of the insurance claim proceeds as payment for their services. Examples are water dry-out companies, emergency services contractors, and fire cleanup companies. Insurance carriers have been challenging these types of assignments in recent years. A recent appeal by a water dry-out company demonstrates this.1

A homeowner suffered a water loss at her property and entered into a remediation contract with Nextgen Restoration to repair the damages. The homeowner submitted a signed assignment of benefits to Nextgen. She was insured for property damage under her policy of insurance with Citizens. Citizens paid only a part of the water remediation bill, and the lawsuit by the remediation company against Citizens followed.

Citizens initially filed a motion to dismiss the case because no policy was attached to the complaint. Later, Citizens filed an answer and affirmative defenses to the complaint claiming that there was an “invalid assignment” from the policyholder to Nextgen. During a hearing before the trial court on the motion to dismiss for failing to attach the policy to the complaint, Citizens’ counsel argued that Citizens was experiencing “an absolute crisis” with remediation companies. Citizens’ counsel then explained that Citizens “desperately” needed rulings and case law on these assignments.

Apparently the trial court was persuaded by these pleas from Citizens’ counsel. The trial court dismissed the complaint due to an invalid assignment. The water remediation company appealed that order.

The appellate court reversed the trial court’s ruling because “the trial court resolved the case on an issue that was not raised in the motion to dismiss and could not have been resolved on this record even if it had been raised.” The appellate court noted that the insurance policy had never even been placed into the record of the case.

The appellate court noted that Citizens’ argument is that the assignment of insurance proceeds is prevented by the insurance policy’s anti-assignment of the policy provision. The Court noted that provision of the insurance contract “does not appear to prevent an assignment of benefits or proceeds owing by virtue of a claim arising under the policy….we note that other cases seem to permit assignees to bring similar actions.”

The comments by the appellate court unrelated to its holding of the case seem to indicate the Court’s recognition of these types of assignments. The effort by Citizens to invalidate the assignment in this case was surprising. This seems to be a common attack launched by insurance carriers to these necessary and vital emergency services vendors’ contracts following property losses. We will monitor updates on the law in this area as cases are decided involving the assignment of benefits issue.

1 Nextgen Restoration Inc. v. Citizens Property Ins. Corp., No. 2D12-2990 (Fla. 2d DCA 2013).

  • Matt Jones

    Speaking as a company claim handler, this was the incorrect way to go about this for all 3 parties involved.

    1 – An insured should never give another party carte-blanche to pursue a claim on their policy. If a fraudulent claim were to be submitted, I would consider the policy holder to be as responsible as the vendor, and often caution my insureds that they need to know what is being done “on their behalf”.

    Even worse for an insured is when a vendor requires this sort of agreement up front, before work is done, and then does a poor repair, or perhaps may not complete the repairs. By signing away their rights like this they have just lost any and all leverage they have to resolve issues with unsatisfactory work through withholding payment.

    2 – This is a strong-arm tactic used by vendors to to try and slip things past. I understand their desire to do this in order to make sure they get paid, but its not the way the policy works. Nearly every policy allows for payment to be made as directed by the policy holder, so long as no other rights are infringed on, including any mortgage holders.

    Clear communication by the vendor up front to the insured and the insurer advising they they have an agreement to be named on the check is critical. If the company has this agreement on record, and they fail to name the vendor, I believe there is a case for the insurer having to pay a 2nd time if the insured runs off to Disney with the money.

    3 – The insurer is always in control. The appropriate thing would have been to send this invoice back to the insured, and require that they submit it as part of their claim, confirming that they are in agreement with the amounts, the work that was done was all a result of the loss.

    So long as everything checks out payment should be issued naming all interested parties (insured, vendor, mortgagee, etc) as appropriate, and then mailed to the insured.

    Conclusion – This action was the result of ignorance of all 3 parties, and was something that could easily be avoided.