The Florida Court of Appeals, Fourth District, in the case of One Call Property Services v. Security First Ins. Co., 2015 WL 2393353 (Fla. 4th DCA May 20, 2015), held that an insured’s assignment of a breach of contract action to a third party was valid notwithstanding the policy’s anti-assignment clause. This case involved an assignment made by the insured to a property restoration/emergency services company, One Call Property Services (One Call), following a water loss. One Call performed emergency water removal services for the insured following a water loss. The insured assigned the insured’s right to the insurance proceeds as payment for the emergency services. The insurance company, Security First, refused to reimburse One Call adequately for the services it provided. Security First moved to dismiss the breach of contract lawsuit arguing that the policy has a non-assignment provision and, when the non-assignment provision was read in conjunction with the loss payment provision of the policy, the policy precluded One Call, as assignee for the insured, from bringing the lawsuit to determine the amount of the loss and what was due under the policy. The trial court granted the motion to dismiss. The Florida Court of Appeals reversed.
The Florida Court of Appeals began its analysis by recognizing under Florida law that “[a]ll contractual rights are assignable unless the contract prohibit[ed] assignment, the contract involve[d] obligations of a personal nature, or public policy dictate[d] against assignment.” (citing Kohl v. Blue Cross & Blue Shield of Fla., Inc., 988 So.2d 654, 658 (Fla. 4th DCA 2008)). By Florida statute, insurance policies “may be assignable, or not assignable, as provided by its terms.” Fla. Stat. § 627.422 (2012). The Court also noted that a chose in action—“the right to bring an action to recover a debt, money, or thing”—which arose out of a contract was assignable under Florida law and could “be sued upon and recovered by the assignee in his own name and right.” (citing Spears v. West Coast Builders’ Supply Co., 101 Fla. 980, 983, 133 So. 97, 98 (1931) and Black’s Law Dictionary (9th ed. 2009)). The Court recognized that a claim on an insurance policy is a chose in action and was assignable. (citing United Cos. Life Ins. Co. v. State Farm and Fire Cas. Co., 477 So.2d 645, 646 (Fla. 1st DCA 1985)). Therefore, an insurance policy under Florida law could be assigned as any other chose in action unless the insurance policy contained a provision forbidding assignment.
The Florida Court of Appeals went on to explain that even in situations where the insurance policy contained a provision barring assignment of the policy, insureds could still assign post-loss claims under Florida law. (citing West Fla. Grocery Co. v. Teutonia Fire Ins. Co., 74 Fla. 220, 224, 77 So. 209, 210-11 (1917) (“The policy was assigned after loss, and it is a well-settled rule 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.”); Lexington Ins. Co. v. Simkins Indus., Inc., 704 So.2d 1384, 1386 n. 3 (Fla. 1998) (“[The insurer] concedes that an insured may assign insurance proceeds to a third party after a loss, even without the consent of the insurer.”); Accident Cleaners, Inc. v. Universal Ins. Co., 2015 WL 1609973, *2 (Fla. 5th DCA Apr. 10, 2015) (“[The insurer’s] argument ignores that the right to recover is freely assignable after loss and that an assignee has a common-law right to sue on a breach of contract claim. Dating back to 1917, the Florida Supreme Court recognized that provisions in insurance contracts requiring consent to assignment of the policy do not apply to assignment after loss.”); Citizens Prop. Ins. Corp. v. Ifergane, 114 So.3d 190, 195 (Fla. 3rd DCA 2012) (“Post-loss insurance claims are freely assignable without the consent of the insurer.”)). Notwithstanding the well-settled Florida case law allowing post-loss assignments of insurance claims, the Court observed that Security First was arguing that the assignment was invalid pursuant to the policy’s anti-assignment and loss payment provisions. Security First’s argument against assignment was that the insured was attempting to assign unaccrued rights under the policy. Supporting this argument, Security First asserted that the time the assignment was executed, the insured had nothing to assign because at that time there were no benefits due and owing to the insured under the policy. This argument was based upon the policy’s loss payment clause.
The loss payment provision of the policy specified that Security First was not obligated to pay any loss damages until 20 days after receiving a proof of loss, 60 days after receiving a written proof of loss and there was an entry of a final judgment or written executed mediation settlement, or within 90 days after receiving final notice of an initial claim “reopened claim” or “supplemental claim” from the insured.
The Florida Court of Appeals correctly noted that the issue confronting the court was whether payment under the policy must be due under the loss payment provision before an insured could assign a post-loss claim under the policy. The Court rejected Security First’s argument in support of the issue finding that the loss payment provision fell short of creating a contractual bar to assignment. The Court held that a standard loss payment provision in an insurance policy did not preclude an assignment of a post-loss claim, even when the payment was not yet due. Such loss payment clauses merely address the timing of the payment and expressly contemplate that a lawsuit could occur before payment is due. The Court declined to interpret Security First’s loss payment clause as affecting the validity of a post-loss assignment.
The Florida Court of Appeals held 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. Furthermore, according to the Court, even assuming that the insured’s right to benefits did not accrue until payment was due under the loss payment provision, there was no reason why the insured could not assign an unaccrued right to benefits under the policy, so long as the assignment took place after the loss. The mere fact that a right was unaccrued at the time of payment did not necessarily prevent its assignment before the right accrued. (citing Restatement (Second) of Contracts § 320 “The fact that a right is . . . conditional does not prevent its assignment before the condition occurs.”). Provided that the insured complies with all policy conditions, the Court held that a third party assignee may recover benefits on a covered loss.
The Court next addressed the practical implications of the Court’s decision. The Court observed that the issue of anti-assignment boiled down to two competing public policy considerations. First, whether the assignment of benefits allowed contractors to unilaterally set the value of a claim and demand payment for fraudulent or inflated invoices; and second, allowing the assignment of benefits would allow homeowners to hire contractors for emergency repairs immediately after a loss, particularly in situations where homeowners cannot afford to pay the contractors up front. The Court was not in a position to evaluate either of these public policy arguments because the record in the trial court was insufficient. However, the Court did note that if studies showed that assignments invited fraud or abuse, then the Florida Legislature was in the best position to investigate and undertake comprehensive reform and not the court.
The Court remanded the case to the trial court for further proceedings. In doing so, the Court emphasized that the Court had declined to reach any of Security First’s other challenges to the assignment which included that the assignment violated the public adjuster’s statute, the statute governing insurable interests, or whether the assignment was a partial assignment that could not be enforced against Security First without its consent.
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