As I and some of my colleagues have written about lately, in most states, after a covered loss has occurred, policyholders generally can assign the insurance benefits they’re entitled to receive in connection with that loss, despite language to the contrary in their policy. Following a devastating loss, such as the damage caused by the hurricanes that recently hit Texas and Florida, some policyholders are faced with the daunting task of rebuilding their homes, offices and other structures. Even if they’re fully insured for the cost of rebuilding their property, some policyholders may not want to or be able to. For some, the best—or only—choice may be to sell what’s left of their property.
As my colleague, Sean Shaw, has noted, Florida courts have a long history of enforcing post-loss assignments of policy benefits. Today, I’ll look at one of those decisions, One Call Property Services, Inc. v. Security First Insurance Company,1 and discuss its possible implications for Florida policyholders considering selling their property in its damaged state. In One Call, the Court of Appeal held that the policyholder’s assignment of his “rights, benefits, and proceeds under any applicable insurance policies” was enforceable against the policyholder’s property insurance company, despite a provision in the policy that prohibited the policyholder’s assignment of the policy. In that respect, the court held that an insurance claim is a “chose in action” (i.e., a right to recover a debt or money) and not the policy itself. Therefore, the post-loss assignment was not subject to the policy provision that prohibited assignment of the policy.
Notably, the court specified that an insurance payment need not be due or the amount of the payment established at the time of the assignment for the payment to be assignable. In other words, policyholders may assign what I’ve referred to in other blogs as “Contingent Benefits,” that is, benefits (such as payments) that are not yet due at the time of the assignment and that may not even be owed unless certain conditions are later satisfied, such as completing approved repairs.
In One Call, the Florida Court of Appeals stated,
We therefore conclude that an assignable right to benefits accrues on the date of the loss, even though payment is not yet due under the loss payment clause.
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[E]ven assuming an insured’s right to benefits does not accrue until payment is due under the loss payment provision, there is no reason why an insured could not assign an unaccrued right to benefits under the policy, so long as the assignment took place after the loss. The fact that a right is unaccrued does not necessarily prevent its assignment before the right accrues.
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[A]s long as the insured complies with all policy conditions, a third-party assignee may recover benefits on a covered loss.
165 So.3d at 754-755 (citations omitted).
The court further clarified that even though the language of the policy in One Call stated that the policyholder (identified as “you” in the policy) was to be involved in the adjustment or negotiation of the claim, such references in the policy did not preclude someone else from adjusting the claim in place of the policyholder. The court stated, “Although this language [of the policy] contemplates the insured’s participation in the adjustment process, it does not impose a duty on the insured to adjust the loss.”2
The decision in One Call strongly supports the enforcement of post-loss assignments of noncontingent, and contingent, benefits under policies governed by Florida law. In that respect, the decision is consistent with the rulings in other states that I’ve discussed in other blogs.
As a practical matter, under the principles set out by the Court of Appeal in One Call, Florida policyholders whose property has suffered a covered loss should be able to assign their claim for value (including money), even if the amount of the claim is not yet determined or payment not yet due. For policyholders who have decided not to rebuild their damaged home or other insured structure, this generally means they may sell their property in its damaged condition and assign their insurance claim, and the assignee may recover the amount of the claim from the insurance company, as long as the associated conditions of the policy are satisfied or excused. For policyholders with a replacement cost policy, under the ruling handed down in One Call, they can assign not only the right to receive the actual cash value (“ACV”) of their claim, but the replacement cost value (“RCV”), regardless of whether the ACV amount of the claim has been agreed to or the approved repairs completed. To recover the RCV or depreciation holdback, the assignee must complete the approved repairs and comply with all other applicable conditions of the policy.
Keep in mind that determining the validity of an assignment of an insurance claim always begins with an analysis of the terms of both the policy and the assignment. Before making any major decisions, policyholders should seek independent professional advice and, when applicable, obtain multiple bids or offers.
In addition, policyholders in Florida with claims arising from Hurricane Irma, should also be mindful of the Office of Insurance Regulation’s Emergency Order, issued on September 13, 2017, and the pending legislation that could affect policyholders’ ability to assign claims, both of which my colleague, Sean Shaw, also pointed out in prior blogs.
1 One Call Property Services, Inc. v. Security First Ins. Co., 165 So.3d 749 (Fla. DCA 2015).
2 Id. (emphasis in original).