In Florida, the use of an assignment of benefits (AOB) has become increasingly popular as a means of streamlining property insurance claims. They also have come under fire from insurance carriers, and as part of the recent sweeping property insurance reforms in Florida, the Florida legislature banned the future use of AOBs in property claims. But they’re not gone yet — at least for insurance policies issued before 2023. Even for those pre-2023 policies, however, Florida law extensively regulates the use of AOBs.
Whether you’re a homeowner or a commercial property owner, you need to know about these rules and regulations. The cost of violating these rules is high, often meaning the AOB is void and entirely unenforceable! Plus, the laws give property owners important rights and protections from abuses by service providers. So read on to make sure you enter an AOB that with Florida AOB law.
If you’re looking for other helpful information about Florida insurance claims laws and rules, check out our Florida Homeowner’s Guide to Property Insurance Claims.
AOB Refresher: What is an Assignment of Benefits?
In property claims, an assignment of benefits (AOB) is an agreement where a contractor agrees to make repairs and you agree to let the contractor collect directly from the insurance company for those repairs. Technically, an AOB is a formal assignment of your contractual right to payment under your homeowner’s or commercial property insurance policy — you assign to the contractor certain benefits under your insurance policy.
Pros and Cons of AOBs
Why enter an AOB? Homeowners and other property owners enter AOBs for several reasons, but the most common is convenience. Dealing with contractor bids, adjuster reports, and the potential back-and-forth with an insurer is laborious, painful, and, to those who are new to property insurance claims, very confusing. It can be much more efficient and effective to let an experience contractor handle that work than to do it yourself.
If it’s convenient, then why not enter an AOB? Here too there are several reasons, but the one that’s most important is that you lose control of your claim, at least for the scope of repairs undertaken by the contractor. Subject to a few exceptions under Florida law, an assignment of benefits is permanent. So if you don’t like the way that the contractor is handling your claim, there’s not much that you can do about it. The control factor is yet another reason why it’s critical to pick a reputable, licensed contractor to make insured repairs to your home or business.
If you want to learn more about the pros and cons of AOBs for policyholders, read our property owner’s guide to an assignment of benefits.
How Recent Property Insurance Reforms in Florida Affect AOBs
In December 2022, the Florida legislature enacted Senate Bill 2-A, a game-changing law that transformed the property insurance landscape in Florida. Among other major changes to Florida property insurance and claims, SB 2-A effectively outlawed the future use of assignment of benefits in property insurance claims. Under the new reforms, any homeowner’s insurance policy or commercial property insurance policy that issued on or after January 1, 2023 is not eligible for an AOB.
In other words, due to the 2022 Florida property insurance reforms, neither homeowners nor business property owners can enter an AOB if their insurance policy issued on or after January 1, 2023.
Is an Assignment of Benefits Enforceable under Florida Law?
Maybe. The answer depends on whether the underlying policy issued before January 1, 2023, and whether the assignment of benefits complies with all the requirements of Section 627.7152, Florida Statues. If the answer to either of those questions is no, then the AOB is not enforceable for property claims in Florida.
Requirements for an Enforceable AOB in Florida
The issue of whether an AOB in Florida is enforceable is complicated. To make the issue more understandable, we’ve broken it down in the sections below.
Your Insurance Policy Must Have Issued Before January 1, 2023
As we’ve said already, the threshold question for whether an AOB is enforceable in Florida is when the applicable policy issued. If the policy issued on or after January 1, 2023, that’s the end of the story — any AOB of that policy is unenforceable, no matter how many hoops you jump through.
The AOB contract must meet the requirements of Section 627.7152(2), Florida Statutes.
If the insurance policy issued before 2023, then the AOB still must comply with the rest of Section 627.7152, Florida Statutes. In particular, under Section 627.7152(2)(a), an assignment of benefits is not enforceable in Florida unless the AOB contract meets all of the following requirements.
The AOB contract must be in writing and signed by both parties.
Florida law requires that an AOB contract “[b]e in writing and executed by and between the assignor and the assignee.” Section 627.7152(2)(a)(2), Florida Statutes.
This one is straightforward: An AOB isn’t enforceable in Florida unless you and the contractor both sign a written AOB contract.
The AOB contract must explicitly allow you to rescind the AOB without penalty within certain periods
Florida law requires that an AOB contract “[c]ontain a provision that allows the assignor to rescind the assignment agreement without a penalty or fee by submitting a written notice of rescission signed by the assignor to the assignee within 14 days after the execution of the agreement, at least 30 days after the date work on the property is scheduled to commence if the assignee has not substantially performed, or at least 30 days after the execution of the agreement if the agreement does not contain a commencement date and the assignee has not begun substantial work on the property.” Section 627.7152(2)(a)(3), Florida Statutes.
Don’t forget, this provision doesn’t just give you the right to rescind an AOB within the time periods stated above — it requires that the AOB contract actually contain the statutory language giving you those rights.
Also, the AOB contract needs to include all of this statutory language. At least one court has suggested that if even part of this language is missing, then the AOB does not meet the requirements of Section 627.7152, Florida Statues, and is therefore invalid and unenforceable. JPJ Servs. LLC v. New Hampshire Ins. Co., No. 21-14329-CIV, (S.D. Fla. June 3, 2022).
The AOB contract must explicitly require the contractor to notify the insurance company about the AOB
Florida law requires that an AOB contract “[c]ontain a provision requiring the assignee to provide a copy of the executed assignment agreement to the insurer within 3 business days after the date on which the assignment agreement is executed or the date on which work begins, whichever is earlier. Delivery of the copy of the assignment agreement to the insurer may be made: a. By personal service, overnight delivery, or electronic transmission, with evidence of delivery in the form of a receipt or other paper or electronic acknowledgment by the insurer; or b. To the location designated for receipt of such agreements as specified in the policy.” Section 627.7152(2)(a)(4), Florida Statutes.
When the AOB contract is signed, it must contain an itemized, per-unit cost estimate of the repair work.
Florida law requires that an AOB contract “[c]ontain a written, itemized, per-unit cost estimate of the services to be performed by the assignee.” Section 627.7152(2)(a)(5), Florida Statutes.
Two important notes here.
First, the estimate must be included in or attached to the AOB at the time that you sign the AOB. Receiving an estimate from the roofer or other contractor after you signed the AOB puts it at risk of being attacked as unenforceable. Several Florida contractors have learned this the hard way. In one case, a court held that providing the estimate to the property owner just one day after the parties had signed the AOB rendered the AOB unenforceable. JPJ Servs. LLC v. New Hampshire Ins. Co., No. 21-14329-CIV (S.D. Fla. June 3, 2022).
Second, the estimate needs to be detailed. A top-line price for the work won’t suffice. Nor will a standard pricing list for products or services. In fact, a Florida appellate court has specifically decided that a standard pricing list for remediation services attached to an AOB did not qualify as an “itemized, per-unit cost estimate” under Section 627.7152(2)(a)(5) and therefore the AOB was void and unenforceable. Air Quality Experts Corp. v. Fam. Sec. Ins. Co., 351 So. 3d 32 (Fla. Dist. Ct. App. 2022).
The AOB contract must be limited to repairs or mitigation for dwellings and structures
Florida law provides that the AOB contract “must relate only to work to be performed by the assignee for services to protect, repair, restore, or replace a dwelling or structure or to mitigate against further damage to such property.” Section 627.7152(2)(a)(6), Florida Statutes.
The AOB contract must contain a very specific notice to you
Specifically, Florida law requires that the AOB contract contain the following notice in 18-point uppercase and boldfaced type:
YOU ARE AGREEING TO GIVE UP CERTAIN RIGHTS YOU HAVE UNDER YOUR INSURANCE POLICY TO A THIRD PARTY, WHICH MAY RESULT IN LITIGATION AGAINST YOUR INSURER. PLEASE READ AND UNDERSTAND THIS DOCUMENT BEFORE SIGNING IT. YOU HAVE THE RIGHT TO CANCEL THIS AGREEMENT WITHOUT PENALTY WITHIN 14 DAYS AFTER THE DATE THIS AGREEMENT IS EXECUTED, AT LEAST 30 DAYS AFTER THE DATE WORK ON THE PROPERTY IS SCHEDULED TO COMMENCE IF THE ASSIGNEE HAS NOT SUBSTANTIALLY PERFORMED, OR AT LEAST 30 DAYS AFTER THE EXECUTION OF THE AGREEMENT IF THE AGREEMENT DOES NOT CONTAIN A COMMENCEMENT DATE AND THE ASSIGNEE HAS NOT BEGUN SUBSTANTIAL WORK ON THE PROPERTY. HOWEVER, YOU ARE OBLIGATED FOR PAYMENT OF ANY CONTRACTED WORK PERFORMED BEFORE THE AGREEMENT IS RESCINDED. THIS AGREEMENT DOES NOT CHANGE YOUR OBLIGATION TO PERFORM THE DUTIES REQUIRED UNDER YOUR PROPERTY INSURANCE POLICY.
In the AOB contract, the contractor must indemnify you.
Under Florida law, the AOB must “[c]ontain a provision requiring the assignee to indemnify and hold harmless the assignor from all liabilities, damages, losses, and costs, including, but not limited to, attorney fees.” Section 627.7152(2)(a)(7), Florida Statutes.
The AOB contract cannot contain a penalty or fee for rescission, processing checks, cancelling the agreement, or administrative costs.
Under Florida law, “an assignment agreement may not contain: 1. A penalty or fee for rescission under subparagraph (a)3.; 2. A check or mortgage processing fee; 3. A penalty or fee for cancellation of the agreement; or 4. An administrative fee.” Section 627.7152(2)(b), Florida Statutes.
Contractor’s Cooperation with Insurance Carrier Required
Florida law set out very specific actions that a contractor working under an AOB must take when dealing with an insurance company. The requirements are specific enough that it’s worth reproducing the statutory language directly:
A [contractor, roofer, restoration pro, etc.]
(a) Must provide the assignor with accurate and up-to-date revised estimates of the scope of work to be performed as supplemental or additional repairs are required.
(b) Must perform the work in accordance with accepted industry standards.
(c) May not seek payment from the assignor exceeding the applicable deductible under the policy unless the assignor has chosen to have additional work performed at the assignor’s own expense.
(d) Must, as a condition precedent to filing suit under the policy, and, if required by the insurer, submit to examinations under oath and recorded statements conducted by the insurer or the insurer’s representative that are reasonably necessary, based on the scope of the work and the complexity of the claim, which examinations and recorded statements must be limited to matters related to the services provided, the cost of the services, and the assignment agreement.
(e) Must, as a condition precedent to filing suit under the policy, and, if required by the insurer, participate in appraisal or other alternative dispute resolution methods in accordance with the terms of the policy.Section 627.7152(4), Florida Statutes.
Limited Reimbursements for Emergency Repair AOBs
Contractors and property owners should know that Florida law limits insurance reimbursements for emergency repairs, such as roof tarping and water mitigation. Specifically, Section 627.7152(2)(c), Florida Statutes, caps insurance reimbursements for AOB repairs made under “urgent or emergency circumstances” at $3,000 or 1 percent of the applicable Coverage A limit, whichever is greater. Section 627.7152(2)(d), Florida Statutes. In addition, if the AOB contract provides for reimbursement beyond these limits, the AOB is invalid and unenforceable. The statute defines “urgent or emergency circumstances” as “a situation in which a loss to property, if not addressed immediately, will result in additional damage until measures are completed to prevent such damage.”
Under an AOB, a Contractor Cannot Collect Payment from You
By signing an AOB, a contractor permanently waives its right to collect from or sue you for payments owed for services described in the AOB. This waiver of the right to collect or sue is fundamental to the AOB, and one of the important benefits of AOBs for you. In Florida, the waiver applies even if you rescind the AOB or the AOB is later held to be invalid.
There are a few important exceptions to the general waiver above. Specifically, you are responsible for:
- Any applicable deductible.
- Any betterment ordered and performed that is approved by the named insured.
- Any contracted work performed before the assignment agreement is rescinded.