Court ruling considered a “consumer win” for FL insurance policyholders; helps get “rid of bad actors”

A major court ruling this month appears to be one of the first milestone victories for Florida's property insurance policyholders under recent law changes.

The Fifth District Court of Appeal in Daytona Beach ruled that a "direction to pay" (DTP) by a policyholder does not by itself represent an "assignment of benefits" (AOB), upholding Senate Bill 2-A from 2023.

That decision only further emphasizes lawmakers' attempts to end years of excessive litigation, while at the same time hoping to keep insurance costs down.

Senate Bill 2A was part of a sweeping reform, signed by Gov. Ron DeSantis, that prohibits the assignment of benefits (AOB) for residential and commercial property insurance policies issued after Jan. 1, 2023. The bill went into effect on Dec. 16, 2022.

The bill's goal was to avoid third parties suing insurers just to make a profit — a practice that's been common in Florida over the past decades.

According to a report by Newsweek, in 2020, for example, 79% of homeowners insurance lawsuits nationwide were in Florida — even as the state accounted for only 9% of the U.S. homeowner's insurance claims, according to the Florida Office of Insurance Regulation.

Alejandro Pérez Duque, who directs the PVG Insurance Group on Key Biscayne, said he was familiar with this case and applauds the decision.

"I think it shows the courts acting appropriately," he said. "Hurricanes in Florida (and fires in California) are catastrophic enough on their own that they don't need attorneys' frivolous lawsuits and other bad actors making the industry even worse for consumers as to capacity and pricing. Getting rid of bad actors is positive for both carriers and consumers."

In the recent ruling of Case No. 5D2023-2810, the 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).

According to the court filing, Caruso owns a house in The Villages, a retirement community up in central Florida.

After his house suffered roof damage in 2019, Caruso selected Noland's Roofing to repair it and signed a "Direction of Payment" instructing his insurer, American Integrity, to pay the company directly. (A DTP allows a policyholder to instruct their insurance company to pay the claim proceeds to a third party.)

After he received American Integrity's valuation of his claim, Caruso signed an "Assignment of Benefits Contract" with HICA — whose goal is to help policyholders enforce their rights — in 2020. (An AOB allows a third party to seek payment directly from the policyholder's insurance company, as if it was the insured.)

According to the filing, Caruso also signed an "Insured Acknowledgement Form" in which he attested, "I want HICA to hold my insurance company accountable for their obligation(s) under the policy of insurance and also to ensure that the direction to pay that I signed with a separate company is honored."

HICA 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.

But the Fifth District Court of Appeal agreed 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."

That's because Florida's AOB law forbids policy holders 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.

The court found that the Assignment of Benefits contract specifically says that HICA will make payments in accordance with the Direction of Payment.

The court also ruled that there is sufficient evidence in this case to show that any money recovered in this case would be used to make repairs to the roof by Noland Roofing, and that payment would be made to that company. Caruso's appellee attorneys were Caryn L. Bellus and Benjamin B. Carter, of Kubicki Draper, P.A., Miami.

One insurance expert told Newsweek: "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."