Wading into a high-profile issue in the insurance industry, a South Florida appeals court Wednesday sided with contractors who do emergency repair work for homeowners and pursue payments from insurance companies.
The controversial issue centers on a practice known as “assignment of benefits,” which involves homeowners signing over insurance-policy benefits to contractors who do work such as repairing water damage. In three cases from Palm Beach County, the 4th District Court of Appeal ruled against property insurers that argued assignments of benefits were invalid.
In a lengthy opinion in one of the cases, the appeals court said debate about the issue boils down to competing “public policy considerations” that could be addressed by state lawmakers. The court, which reversed rulings by circuit judges, also pointed to past cases that upheld assigning contractual rights.
“On the one side, the insurance industry argues that assignments of benefits allow contractors to unilaterally set the value of a claim and demand payment for fraudulent or inflated invoices,” said the opinion, written by appeals-court Judge Carole Taylor and joined by Chief Judge Dorian Damoorgian and Judge Melanie May. “On the other side, contractors argue that assignments of benefits allow homeowners to hire contractors for emergency repairs immediately after a loss, particularly in situations where the homeowners cannot afford to pay the contractors up front.”