Accept All Cookies
On April 24, 2019, the Florida Legislature passed a bill (the “Act”)1 to reform the requirements for the assignment of benefits of claims for residential and commercial property insurance. The Act is expected to become law. Assignment of benefits in Florida has been a concern for the ILS market as related litigation has become a significant factor in losses and claims development for a number of outstanding catastrophe bonds.
For a number of years, legislators in Florida had attempted to address perceived abuses in the assignment of benefits of property insurance claims. Attorneys and contractors would find homeowners, identify a basis for a potential claim and offer “free” repairs in exchange for an assignment of these claims. Often an inflated or spurious claim would then be submitted to the insurer. In a legal dispute, under the prior statute, the insurer would be liable to pay attorney’s fees in the event the insurer was found to be liable, whereas the plaintiff could not be liable to pay the insurer’s attorney’s fees. The resulting increase in claims and litigation has led to higher insurance rates in Florida and much greater uncertainty in loss development.
The Act, which passed the legislature and is expected to be signed by Governor Ron DeSantis, creates new sections 627.7152 and 627.7153, and amends certain existing statues. Notable provisions of the Act include:
In addition, the Act:
The Act, upon being signed by the Governor, will be effective July 1, 2019, and will not apply to ongoing assignment of benefits litigation. The Act could rationalize loss development for Florida catastrophe bonds as incentives for opportunistic litigation would be reduced while requiring the provision of detailed claims information; consequently, predictability of claims and losses for such bonds could improve.
2 Fla. Stat. § 627.7152 (2)(a)(1)-(7). All references to the Florida Statues are upon effectiveness of the Act.
3 Fla. Stat. § 627.7152 (10)
4 Fla. Stat. § 627.7153