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Florida Court Makes Major Ruling on Insurance
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Article Courtesy of Newsweek
By Giulia Carbonaro
Published January ?16, 2025
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Florida court of appeals ruled
last week that a "direction to pay" (DTP) by a policyholder does not, by
itself, represent an "assignment of benefits" (AOB), in a decision that
reiterates lawmakers' attempts to end a culture of excessive litigation
in the Sunshine State.
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The decision upheld a reform introduced
in Florida in 2023 in the form of Senate Bill 2-A, which
prohibited the state's long-standing practice of assigning
benefits to another party for those holding insurance
policies issued after January 1 of that same year. The
bill's goal was to avoid third parties suing insurers just
to make a profit—a practice that's been way too common in
the state in past decades.
Why It Matters
The court's ruling comes as Florida is making significant
efforts to address the issues that led to the current
homeowners insurance crisis in the state, including the
increased risk posed by climate change, widespread fraud,
and abusive and unnecessary litigation.
Critics have long argued that the rules around AOB in
Florida allow third parties to file excessive lawsuits
against insurers and profit from the practice, which in turn
has contributed to skyrocketing premiums. In 2020, 79
percent of homeowners insurance lawsuits nationwide were in
Florida—even as the state accounted for only 9 percent of
the U.S. homeowners insurance claims, according to the
Florida Office of Insurance Regulation.
Many insurers who haven't been able to
keep up with the increased likelihood of paying high damage
claims—because of the risks of excessive lawsuits or the
growing severity and frequency of natural disasters—have cut
coverage in vulnerable areas or withdrawn from the state
entirely.
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Jody Wise looks into her home that is filled with mud
on October 13 in Manasota Key, Florida. A Florida court of appeals
issued a ruling backing lawmakers' efforts to curb excessive
litigation in the state, forbidding third parties from collecting
money from insurers on behalf of policyholders.
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That has left Florida homeowners with limited
availability and has led to the ballooning of the state's insurer of
last resort, Citizens Property Insurance Corporation.
What To Know
Florida's Fifth District Court of Appeal agreed with a decision
previously taken by a lower court in a case involving Leonardo Caruso, a
resident of The Villages, his insurer American Integrity Insurance Co.
and Holding Insurance Companies Accountable (HICA).
What's The Case About?
Caruso owns a house in The Villages, Florida's sprawling retirement
community, home to more than 130,000 people ages 55 and above.
After his house suffered roof damage in 2019, according to a court
filing, Caruso selected Noland's Roofing to repair it and signed a DTP
instructing his insurer, American Integrity, to pay the company
directly. A DTP allows the policyholder, in this case Caruso, to
instruct their insurance company to pay the claim proceeds directly to a
third party.
After he received American Integrity's valuation of his claim, Caruso
signed an AOB with HICA—whose goal is to help policyholders enforce
their rights—in 2020. An AOB is a document signed by a policyholder that
allows a third party to seek payment directly from the policyholder's
insurance company, as if it was the insured.
HICA then sued American Integrity for breach of contract for refusing to
pay the entirety of Caruso's claim, saying that payment should be made
in accordance with the existing DTP. In this case, HICA had the goal of
collecting money from Caruso's insurance companies.
What Did The Court Decide?
The Florida court of appeals agreed on Friday with the decision
previously made by a trial court in the case, saying that "HICA lacked
standing to sue because the assignment that it relied on did not follow
the governing statue."
Specifically, the recently reformed AOB law forbids policyholders from
assigning their insurance benefits to third parties to file claims and
receive payments.
"Without a valid assignment, HICA has no standing to sue American
Integrity for its alleged breach of Caruso's insurance policy," the
court ruled.
What People Are Saying
Florida's Fifth District Court of Appeals wrote in its ruling that the
assignment HICA relies on is an "assignment agreement." The Legislature
has mandated that such assignments comply with all other provisions of
the statute.
"Because the assignment here did not do so, it is 'invalid and
unenforceable.' And without a valid assignment, HICA has no standing to
sue American Integrity for its alleged breach of Caruso's insurance
policy."
Brian Donovan, chief actuary for Citizens Property Insurance
Corporation, toldActuarial Review in July: "Everyone knows the reason
everyone's losing money is because of litigation."
Mark Friedlander, director of the Insurance Information Institute, or
Triple-I, previously told Newsweek that the Florida property insurance
market has stabilized significantly over the past year "due to
legislative changes addressing a manmade crisis caused by legal system
abuse and claim fraud."
What Happens Next
According to Friedlander, the Florida property insurance market is in
"its strongest financial position in more than a decade."
Despite progress, the market remains in a vulnerable position,
especially as it still works to figure out a sustainable way to address
the issue of the growing risk posed by climate change.
HOLDING
INSURANCE COMPANIES ACCOUNTABLE, LLC a/a/o Leonard Caruso, v. AMERICAN
INTEGRITY INSURANCE COMPANY OF FLORIDA
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