“Hurricane Preparedness for Businesses: Is your AOB agreement enforceable in 2020?”

The hurricane season is officially upon us and as of July 1, 2019, new laws were enacted in Florida that significantly changed the policies surrounding assignment agreements, frequently referred to as “Assignment of Benefits” or “AOBs.” In a state frequently impacted by natural disasters, AOBs are invaluable tools for roofers, contractors, and other third parties to directly negotiate with insurance companies and quickly repair damaged homes, settle claims, and collect payment.

However, over the years, storm chasers and unscrupulous contractors have abused AOBs by filing exorbitant claims and pursuing frivolous lawsuits against insurance companies. In response, Governor DeSantis signed a new piece of legislation last year that shifted a significant amount of power away from contractors and back into the hands to the homeowners and insurance companies.

The legislation affects all AOBs signed after July 1, 2019, so contractors should hire an attorney to review their existing contract language as soon as possible to ensure their AOBs are valid and enforceable under the new laws. Continue reading for a short summary of just a few of the new changes.

Requirements for Assignment Agreements to be Enforceable

Florida Statute §627.7152(2) establishes a number of requirements for AOBs. Among other things, AOBs must now include specific cancellation provisions, as well as a written, itemized, per-unit cost estimate of the services to be performed by the contractor. Additionally, the contractor must provide the AOB to the insurance company within three (3) days after the agreement is signed or when the work begins, whichever is earlier.

Prohibition on Fees

Under the new laws, AOBs may NOT contain:

(1) a penalty or fee for rescission of the agreement;
(2) a check or mortgage processing fee;
(3) a penalty or fee for cancellation of the agreement; or
(4) an administrative fee.

Policies Prohibiting Assignment Agreement

Under Florida Statute 627.7153, insurance companies can offer homeowners policies that restrict or prohibit assignment agreements under certain conditions. Therefore, contractors will need to review each homeowner’s policy prior to starting any work to determine whether AOBs are permissible under that policy and review the policy carefully for monetary limits on contract amounts.

Limits on Assignment Agreements in Urgent or Emergency Circumstances

Where a property owner acts under an urgent or emergency circumstance to protect property from further damage, contractors may not receive an AOB under a residential property insurance policy in excess of $3,000.00 or 1% of the Coverage A limit, whichever is greater.

In addition to the provisions above, the new AOB law adds new pre-suit hurdles for contractors seeking to file lawsuits against insurance companies and also abolishes the one-way fee provision in favor of a new formula based on pre-suit settlement negotiations.

Florida contractors who use AOBs in their contracts or who want to file suit to enforce AOBs should meet with a licensed attorney to discuss these changes in the law in depth.

Additionally, homeowners who have questions about AOBs and how these agreements impact their rights should meet with an attorney to discuss these issues prior to signing the agreement.

The attorneys at Stephen H. Artman, P.A. are experienced in all aspects of construction and contract litigation and are available now to meet and discuss your rights under these new laws. Call us at (863) 688-5252 to set up your appointment now.

(Keywords: Florida, AOB, assignment of benefits, assignment agreements, insurance, construction, restoration, contractors, roofing, hurricanes, new laws)