So what does Michelangelo have to do with pilgrims you ask.  Well, maybe nothing except that they, as he, certainly aimed very, very high when they dared to brave the many dangers and fears of traveling to a new land. This tiny band of just over one hundred plain English men and women, seeking a better life, crossed the storm-tossed Atlantic in the tiny Mayflower and arrived at the coast of present-day Massachusetts in late 1620. They bound themselves to one another as a self-governing political community, then went ashore to build a home in a strange and frightening new world. Having arrived on the eve of an unexpectedly cruel winter, they endured unimaginable hardships over the next few months, death claiming half of them by spring. Yet through the mercy of God and the assistance of their new Indian neighbors, the remainder survived to reap a bountiful harvest in the fall of 1621, at which time they paused to celebrate the goodness of God with a special feast-the First Thanksgiving.  We Americans have so often cast a romantic tone to the first Thanksgiving, but in reality life was cruel and fraught with every danger imaginable.  Can you think of a time when you were frightened by the sight of a snake or anything that comes from the woods?  And heaven forbid a time we have traveled to a new city and sensed a little bit of being lost in traffic; or  were in a medical situation where we felt helpless.  How much more these brave souls faced in a new world, with danger at every turn.  These truly brave men and women had set their aim for a new life, daring to brave all that came with their lofty goals.  Let’s all take a moment to not only be thankful for the risks they took that gave us our beautiful country, but also the example of how we, too, can meet the challenges of life with determination, setting our aim high, and reaching for greatness.

Few issues have been so hotly disputed in recent years as the issue of what constitutes a proper “assignment” of homeowner’s insurance benefits. Historically, the rule of assignment creation in Florida is that any instruction, document, or act that vests in one party the right to receive funds that would be due to another party operates as an assignment.[i]  Recently, assignments of benefits (“AOB”) have been accepted by some courts as a valid way for a homeowner to confer homeowner’s insurance policy benefits to a third party, such as a water remediation company or a roofing company.

On the other hand, homestead protection is a fundamental right that is enshrined in Florida’s Constitution. While homestead principles do not typically arise in the insurance context, recent cases in which insurers have applied homestead law to fight AOB lawsuits involving the transfer of homeowner’s insurance benefits may have a profound effect on homeowner’s insurance law.

In Florida, a residential property is inherently instilled with homestead protection when a person acquires property and makes it his or her home. No action of the Legislature, declaration, or other act on the owner’s part is required to make it the owner’s homestead.[ii]  The purpose of the homestead protection is to promote the stability and welfare of the state by securing a householder a home in which the owner and his or her heirs could live beyond the reach of financial misfortune and the demands of creditors.[iii]  Article X, § 4 of Florida’s Constitution specifically provides that homestead protection may only be devised by one of three ways: mortgage, sale, or gift.  If the homeowner is married, then the alienation of homestead property requires the joinder of both spouses.

The Florida Supreme Court has held that “a waiver of the homestead exemption in an unsecured agreement is unenforceable.”[iv]  In fact, the Court noted that while an exemption can be waived by mortgage, “for over a hundred years we have held that it cannot be waived in an unsecured agreement.”[v]  Further, Florida employs a strong public policy in favor of protecting homestead property, such that “an individual cannot waive a right designed to protect both the individual and the public.”[vi]

In recognizing this strong public policy, it is well-settled in Florida that the homestead protection extends not just to the property itself, but also to insurance proceeds obtained as a result of damage to the property.[vii]  More recently, the Third District in Quiroga v. Citizens Prop. Ins. Co., 34 So. 3d 101 (Fla. 3d DCA 2010) held a homeowner cannot be divested of constitutionally protected insurance proceeds through an unsecured agreement.  In Quiroga, the issue concerned whether a contingent fee arrangement entered between a homeowner and his attorney was valid where it sought to divest the homeowner of homestead-protected insurance proceeds secured by his attorney. [viii]  In affirming the trial court, the Third District held that because the homeowner “did not, and as a matter of public policy, cannot through an unsecured agreement such as a contingent fee agreement in this case, enter into an enforceable contract to divest himself from the exemptions afforded him through Article X, section 4(a),” the contingency fee agreement was unenforceable.[ix] Consequently, homeowner’s insurers have begun successfully relying on Quiroga to argue that an AOB is invalid to the extent it seeks to divest the homeowners of constitutionally protected insurance proceeds through an unsecured agreement.  Specifically, in the matter of One Call Property Services, Inc. a/a/o Carl & June Schlanger v. St. Johns Ins. Co. the Circuit Court of the Nineteenth Judicial District in Martin County, Florida recently granted summary judgment in favor of an insurer based on Quiroga, and expressly held that that the AOB was invalid as it was an unsecured agreement.[x]In Schlanger, the Plaintiff, a water remediation company, filed suit against St. Johns Insurance Company for breach of contract.[xi]   As is typical in these situations, the insureds discovered water damage to their property and called Plaintiff to perform mitigation services.  Plaintiff presented the AOB to the insureds for execution, which sought the assignment of all insurance rights, benefits, proceeds, and causes of action to the Plaintiff.  The AOB was signed only by Carl Schlanger. The claim was ultimately denied following an inspection by an engineer.  Following the claim denial, Plaintiff filed suit against the insurer based on the AOB. The trial court granted summary judgment in favor of the insurer, finding that the AOB impermissibly sought to divest the homeowners of constitutionally protected proceeds, and therefore, the AOB was invalid.[xii]  The trial court held that this was particularly true where the AOB was not also executed by June Schlanger. Therefore, the trial court found that the AOB was invalid and void as a matter of law, such that the Plaintiff lacked standing to file suit.[xiii]   Plaintiff appealed the trial court decision, and on December 15, 2015, the Fourth District Court of Appeal will hear oral arguments in this matter. This case is important because it could invalidate AOBs seeking the transfer of homeowner’s insurance policies, benefits, and proceeds on constitutional grounds. If the Fourth District affirms the trial court, then the effect of this decision may be profound, far-reaching, and potentially applicable in thousands of pending cases throughout South Florida and the rest of the state.

Regulators Address Key Issues for 2016 Session

The regulators said that recent consumer complaints involve powers of attorney (POA) and not an AOB, and it concerns them that the extraction company “…could empty one’s bank account” with these broad POA documents.  Commissioner McCarty talked about the “cinch bug effect” where when neighbors spray their grass, the bugs move to another yard–paralleling how bad actors in one area move to other areas and perpetrate the same bad behavior.  Lisa Miller, CEO at Lisa Miller & Associates,  asked the regulators their thoughts on the recent proposed language fining a plumber $10,000 if found guilty of taking a kickback from a water extraction company.  The regulators said, “We don’t want folks to not get a legitimate claim repaired and don’t want them to be at risk,” if a plumber legitimately is receiving a fee.  In response, LMA is looking at ways to limit the fine if the kickback is incurred in the course of an insurance claim.  The current assignment of benefits bill filed is House Bill 79.  This 4 page bill is packed with great reforms to AOB abuse.  See http://www.myfloridahouse.gov/Sections/Bills/billsdetail.aspx?BillId=54899.

Commissioner McCarty spent time on the NAIC’s Own Risk and Solvency Assessment (ORSA), which is an internal process undertaken by an insurer or insurance group to assess the adequacy of its risk management as well as current and prospective solvency positions under normal and severe stress scenarios. The state’s top insurance regulator said, “The realization has set in that whatever happens in Basel, Switzerland will leach into the US domestic system.  Insurance has been outside federal capital standards. With the impact of Dodd-Frank, 30% of companies are now regulated federally and the Fed looks at top down and a consolidated supervisory approach.  State regulators are used to looking at each subsidiary and appropriately making sure each one is walled off.”  Only time will tell how this different approach affects international insurers. On January 1, 2016 Solvency II comes into existence. The Solvency II Directive (2009/138/EC) is an EU Directive that codifies and harmonizes this EU insurance regulation. Primarily Solvency II addresses the amount of capital that EU insurance companies must hold to reduce the risk of insolvency, but Commissioner McCarty said insurers are asking themselves, “Do I have to divert holding capital to Europe”? He went on to say that capital moving outside of the US will obviously adversely affect Florida.  “It’s interesting how something so remote will have a huge impact in a very short time on Florida,” noted the Commissioner. OIR will be proposing to adopt the corporate governance act and ORSA in the 2016 Legislature.

For those of you who were unable to attend the Chamber Insurance Summit, we are happy to go through each presentation and share the highlights and will be reporting on all these issues in future newsletters.

It’s obvious that regulators are heightening the scrutiny of insurance companies’ operations, solvency, and overall market conduct when one considers organizations like IAIA, NAIC and happenings in Basel, Switzerland.  LMA does our  best to give our readers a broad overview of these sweeping oversight regulatory trends. Refer to  the press release issued by the OIR at http://floir.com/PressReleases/index.aspx

http://www.ooyuz.com/geturl?aid=9030728

A general lines agent may:

• charge a per-policy fee not to exceed $10 to cover the administrative cost associated with selling motor vehicle insurance if the policy coverage is limited to Personal Injury Protection (PIP) and Property Damage (PD) under s.627.7295 (5)(a), F.S.
• seek reimbursement from a consumer for the exact amount charged to the agent or agency for a motor vehicle report (MVR) required to underwrite a motor vehicle policy under s.627.7295 (5)(b), F.S.

A Managing General Agent (MGA) may charge:

• up to a per-policy fee not to exceed $25 in the aggregate, i.e., if the consumer purchases more than one policy, only one policy fee may be charged under s.626.7451(11), F.S.

A Surplus Lines Agent may charge:

• up to a $35 policy fee (taxable as premium) per policy under s.626.916(4), F.S.

Any agent or agency accepting premium payments by credit card may seek reimbursement up to the exact amount charged for premium payments made by credit card transaction under s.626.9541(1)(o)2., F.S.

Reprinted  from  http://www.myfloridacfo.com/Division/Agents/Newsletter/ ComplianceCorner.htm).

And Give/Get Some Thanksgiving Love and Grace  

Lisa and the LMA Team