“Directives to Pay” at issue
Recent rulings by Florida’s appellate courts have dealt a significant blow to contractors and organizations attempting to circumvent the state’s 2019 Assignment of Benefits (AOB) reform law, marking a win for insurance companies. The 5th District Court of Appeals (DCA) recently upheld a Marion County ruling against Holding Insurance Companies Accountable (HICA), a group claiming to advocate for homeowners. The court found HICA’s practices violated the 2019 AOB law, statute 627.7152, which was enacted to curb litigation abuse.
HICA argued it was not a contractor but merely facilitated claims for homeowners, suggesting the AOB law didn’t apply to them. However, the court determined HICA’s mandatory transfer of benefits to contractors like Noland’s Roofing effectively constituted an AOB. Since HICA’s agreements did not adhere to the 2019 law’s strict requirements—such as itemized damage listings, signed agreements, and attorney fee limits—the agreements were ruled invalid.
This case follows other similar rulings against HICA and contractors like Richie Kidwell’s Air Quality Assessors, reinforcing the courts’ interpretation that these arrangements fall under the AOB statute. Florida lawmakers adopted the AOB law to combat widespread abuse, where contractors exploited one-way attorney fees to generate excessive litigation. Studies have shown AOB-related lawsuits skyrocketed by 16,000% from 2000 to 2020, burdening insurance companies and driving up costs.
William Large, president of the Florida Justice Reform Institute, emphasized that these rulings solidify the reach of the AOB statute, giving insurance companies greater certainty for actuarial calculations. Attorneys such as Tiffany Roddenberry and Michael Packer noted that the decisions send a clear message: courts will not favor attempts to bypass the law through methods like Directives to Pay (also known as a Direction to Pay).
Although the Florida Legislature banned AOBs outright in 2022, the persistence of lawsuits like HICA’s underscores contractors’ creativity in testing the limits of these statutes. The courts’ firm stance against these practices is expected to deter further challenges and reinforce the intent of the 2019 reforms. While some restoration companies may pivot to alternatives like Directives to Pay, the rulings clarify that such arrangements must still comply with AOB restrictions.
The appellate courts’ decisions are seen as critical in reducing frivolous litigation, alleviating pressures on Florida’s property insurance market, and restoring balance to the claims process.
I told Newsweek for its article on the 5th DCA decision, that “Florida’s insurance market is headed in the right direction. This recent court ruling is yet another consumer win, in essence shutting down a firm that took away a policyholders’ rights to insurance claim proceeds.”
LMA Newsletter of 1-13-25
