AOB No Longer A-OK
By Caitlin A. Polly, Esq.*
For years, the Assignment of Benefits, or AOB, has plagued Florida, having had a widespread and crippling effect on the insurance market and the state’s consumers. While the AOB has been held out by vendors utilizing it as something that promotes protection of Florida consumers, it had hindered the ability of these consumers to obtain affordable insurance and protect against sub-standard, unnecessary and incomplete repairs. By signing House Bill 7065 into law on May 23, 2019, Governor Ron Desantis has attempted to effectuate the changes needed to protect Florida homeowners and insurers from the AOB abuse overlooked by the legislature over the past seven years.
House Bill 7065, which went into effect on July 1, 2019, makes substantial changes to the way in which the AOB can be utilized and the way in which insurers must respond to it. A focus on the major changes affecting insurers—communication, attention to detail and prompt response—will be essential to navigate the requirements set forth by HB 7065.
House Bill 7065 requires insurers to reform their practices and procedures when providing policy options to their insureds. An insurer may prohibit the execution of an AOB by the terms of its policy of insurance. However, for the prohibition to be permissible, communication with the insured/consumer is required. An insurer must also offer the same policy to the insured/consumer without the prohibition and for a lower premium. Insureds are often eager to limit their insurance coverage and protections for a lower premium. Given this reality, it is essential that an insurer devote the time and resources necessary to educate its employees on the substance of the communications that will best help consumers understand what they are purchasing and what they are giving up through a particular policy choice. Insurers must promote a deeper understanding of AOB reform.
II. ATTENTION TO DETAIL
Considering the significant changes to the utilization of the AOB by vendors/assignees, it will be equally important for agents and representatives to understand these changes in depth. Primarily, agents and representatives should be well-versed in the information an AOB should contain per House Bill 7065. The AOB must be written and executed by and between the assignor and assignee. It must also contain:
(1) A provision that allows the assignor to rescind the AOB without penalty or fee by submitting a written notice of rescission signed by the assignor to the assignee within the specified period of time;
(2) A provision asserting the requirement for an executed AOB to be received by an insurer within three business days of execution or the date on which work begins—whichever date is earlier;
(3) A per-unit cost estimate of services to be performed by the assignee;
(4) A word and font-specific notice relating to the impact of the transfer of rights, and the right to rescission time frame; and
(5) A provision requiring the assignee to indemnify and hold the assignor harmless should the policy subject to the AOB prohibit an AOB in any manner.
Additionally, agents and representatives should pay close attention to the date and manner in which an executed AOB is received. House Bill 7065 requires AOB vendors/assignees to submit a copy of the executed AOB—by personal service, overnight delivery or electronic transmission—within three business days after the date of execution or the date on which work begins, whichever date is earlier. Furthermore, an AOB may not contain a penalty or fee for rescission, a check or mortgage processing fee, a penalty or fee for cancellation of the agreement, or an administrative fee.
An AOB that lacks the required language or fails to comply with the requirements set forth is invalid and unenforceable as a matter of law. This facet of the AOB reform alone will undoubtedly provide insurers with a substantial platform to attack AOB validity and provide insurers with the ability to oversee repairs and costs from the beginning.
III. PROMPT RESPONSE
One of the most crucial requirements set forth by HB 7065, and seemingly one of the biggest hurdles for insurers, will be the requirement that an insurer make a prompt response upon receipt of a notice of intent to initiate litigation from an assignee. The response of an insurer in a “prompt” manner, often defined as “without hesitation” or “without delay,” is utilized in a literal sense by the Florida legislature—requiring an insurer to respond in writing within ten business days. The response must provide a pre-suit settlement offer or require the assignee to participate in appraisal or another method of alternative dispute resolution under the policy. For insurers, this requirement substantially condenses the time in which further review, investigation and evaluation of a claim must occur. Strict adherence to procedures will be necessary upon receipt of such notice in order to take the appropriate steps to ensure proper disposition of claims.
Though seemingly a burden, HB 7065 actually provides insurers with the opportunity to avoid costly litigation. However, the statutory requirements must be followed in order to take advantage. As an added bonus to insurers who comply with the foregoing and make a settlement offer to an assignee, the assignee must obtain a judgment at least 50% greater than the pre-suit settlement offer to obtain any attorney’s fees. Furthermore, assignees who do not obtain a judgment at least 25% greater than the settlement offer must pay the insurer’s attorney’s fees.
*Caitlin is an associate in our Jacksonville, Florida office. She can be reached at email@example.com or 904.358.4226.
Defense Digest, Vol. 25, No. 3, September 2019. Defense Digest is prepared by Marshall Dennehey Warner Coleman & Goggin to provide information on recent legal developments of interest to our readers. This publication is not intended to provide legal advice for a specific situation or to create an attorney-client relationship. ATTORNEY ADVERTISING pursuant to New York RPC 7.1. © 2019 Marshall Dennehey Warner Coleman & Goggin. All Rights Reserved. This article may not be reprinted without the express written permission of our firm. For reprints, contact firstname.lastname@example.org.