With a Florida legislative battle brewing again about the issue,an appeals court has ruled against a property insurer's effort toplace restrictions on a controversial practice known as “assignmentof benefits.”

The Fifth District Court of Appeal, in an eight-page rulingFriday, upheld a decision by the Florida Office ofInsurance Regulation to reject restrictions proposed bySecurityFirst Insurance Co.

Driving up property-insurance premiums

The ruling was another blow to the insurance industry, which hasblamed assignment of benefits for driving up property-insurancepremiums, but has been unable to persuade lawmakers to make changesto the long-standing practice.

A three-judge panel of the appeals court pointed to past legalrulings about assignment of benefits and said it was up to theFlorida Legislature to decide whether to make changes.

“Review of the case law relating to the subject of theassignability of post-loss benefits reveals that Florida courtshave been previously invited to consider these public policyarguments; however, the district courts have refused theseinvitations, concluding that such considerations are for theLegislature to address. … We agree that the asserted public policyconcerns are best addressed by the Legislature,” said the ruling,written by Judge George Paulk and joined by Chief Judge Jay Cohenand Judge Wendy Berger.

Increased claims for water damage to homes

In assignment of benefits, homeowners in need of repairs signover benefits to contractors, who ultimately pursue payments frominsurance companies. While assignment of benefits is nothing new,it has become a high-profile issue in recent years because ofincreased claims for water damage to homes, particularly in SouthFlorida.

The insurance industry contends that the practice has becomeriddled with fraud and has increased litigation, driving up costs.But plaintiffs attorneys and contractors argue that assignment ofbenefits helps homeowners hire contractors quickly to repair damageand forces insurers to properly pay claims.

Plaintiffs lawyers and contractors also contend that assignmentof benefits can help prevent consumers from having to fend forthemselves in insurance disputes.

Added restrictions currently prohibited by law

In the case decided Friday, Security First sought to addrestrictions to policies that, in part, would have requiredassignment of benefits to have written consent from policyholdersand their mortgage lenders. The Office of Insurance Regulation anda hearing officer rejected the proposal, with the hearing officerconcluding that a “restriction on the right of a policyholder tofreely assign his or her post-loss benefits is prohibited underFlorida law,” according to the appeals court.

The ruling came as a lobbying battle is building about theassignment-of-benefits issue for the 2018 legislative session,which starts Jan. 9.

Pending legislation

A House committee last month approved a bill (HB 7015) thatwould make changes in assignment of benefits, including takingsteps to curb litigation and impose new reporting requirements. ASenate bill (SB 62) has not been heard in committees.

The assignment-of-benefits debate, however, has moved beyondresidential property-insurance policies and has become an issuewith claims for automobile windshield damage. The Senate Bankingand Insurance Committee on Tuesday is expected to take up a bill(SB 396), filed by Sen. Dorothy Hukill, R-Port Orange, that couldlead to required inspections before damaged windshields getrepaired or replaced.

Related: Cleaning up fraudulent water mitigationclaims

Jim Saunders reports for the News Service of Florida.Contact hin at [email protected].