Emerging issues within the assignment of benefits clause

Abstract

The Assignment of Benefits (AOB) clause under an insurance contract has been recognized for quite some time and until recently has been of little consequence to homeowner's insurance. Over the past decade, however, the clause in homeowner's coverage is coming under fire. Attorneys and water remediation contractors are using Florida's attorney fee-shifting statute in conjunction with an AOB under the Insurance Services Office (ISO) (1999) Homeowners 3 (HO3) -- Special Form policy in filing claims for reimbursement of services rendered subsequent to the insured's executed AOB. As a result, insurer claims costs in Florida are escalating to a crisis point. This paper discusses the challenges within the homeowner's assignment of benefits clause as applied to water mitigation claims in the state of Florida since 2005. We analyze legal and regulatory arguments used to curtail rising litigation in this area. We draw specific attention to Florida's Homestead Exemption as an insurer defense to deflect mounting litigation efforts to pay these increasingly significant claim costs.