Assignment of Benefits Ruling

Scales of Justice

The Florida Fifth District Court of Appeal, in Daytona, affirmed the Florida Office of Insurance Regulation (OIR) denial of an insurer’s proposed form that required a mortgage holder to consent to an assignment of benefits under an insurance policy.   Security First Insurance Co., v. Florida Office of Ins. Regul., Case No. 5D16-3425 (Fla. 5th DCA Dec. 1, 2017).  The Court held that OIR’s decision to deny Security First’s proposed form was based on “well-settled rule that [anti-assignment provisions do] not apply to an assignment after loss.”    The Fifth District Court rejected arguments that OIR’s denial of the proposed policy harms the mortgage holder’s vested rights, and that OIR’s rule places insurers in the danger of violating the statutory duty to act in good faith towards all insureds, including the mortgage holder.  The Fifth District Court stated that such policy issues were better suited for the Legislature, as opposed to the courts.

Interestingly, the Second District Court of Appeal also addressed the issue of whether a mortgage holder’s consent was required in an assignment of benefits case under a homeowner’s policy.  See Biologic, Inc., v. ASI Preferred Ins. Corp., Case 2D16-3798 (Fla. 2nd DCA Oct. 20 2017).  The Second District Court affirmed the trial court’s dismissal of the assignment of benefits claim for failure to obtain the written consent of the mortgage holder.  Unfortunately, the Second District Court’s decision was a “per curium affirmed” without any written explanation.  The result is that the Biologic case is not precedent that can be cited, and will not provide a basis for conflict jurisdiction with the Security First decision.

What does this most likely mean going forward?  I would expect that OIR will review homeowner’s policies which submitted by insurers, like ASI Preferred, as compliant with Florida law, and will inform those insurers the forms requiring a mortgage holders consent for an assignment of benefits post-loss are invalid and do not comply with Florida law.