Assignment of Benefits – Part 2 – Limitations and Requirements under an Assignment of Benefits
In Part 1 of this series, we discussed the framework of an assignment of benefits. In Part 2, we will discuss the statutory requirements and limitations placed on a contractor that has or is attempting to enter into a contract with a property owner under an Assignment of Benefits.
It must be noted that simply because a contractor and property owner enter into what they believe to be an “assignment of benefits”, it does not necessarily result in a valid assignment under Florida Statutes. Florida Statutes §627.7152 provides that for an assignment to be valid, the agreement must:
- Relate to a residential or commercial property insurance policy issued on or after July 1, 2019 and before January 1, 2023;
- Be in writing and executed between the two parties;
- Contain a provision that allows the assignor to rescind the assignment within 14 days after execution of the agreement, at least 30 days after the date work is scheduled to commence, if not substantially performed, or at least 30 days after execution of the agreement if no commencement date and assignee has not begun substantial work on the property;
- Contain a provision requiring assignee to provide a copy of the assignment within 3 business days after execution or the date the work begins, whichever is earlier;
- Contain written, itemized, per-cost estimate of the services to be performed;
- Contain language limiting the assignment to the work to be performed by the assignee;
- Contain the following language:
YOU ARE AGREEING TO GIVE UP CERTAIN RIGHTS YOU HAVE UNDER YOUR INSURANCE POLICY TO A THIRD PARTY, WHICH MAY RESULT IN LITIGATION AGAINST YOUR INSURER. PLEASE READ AND UNDERSTAND THIS DOCUMENT BEFORE SIGNING IT. YOU HAVE THE RIGHT TO CANCEL THIS AGREEMENT WITHOUT PENALTY WITHIN 14 DAYS AFTER THE DATE THIS AGREEMENT IS EXECUTED, AT LEAST 30 DAYS AFTER THE DATE WORK ON THE PROPERTY IS SCHEDULED TO COMMENCE IF THE ASSIGNEE HAS NOT SUBSTANTIALLY PERFORMED, OR AT LEAST 30 DAYS AFTER THE EXECUTION OF THE AGREEMENT IF THE AGREEMENT DOES NOT CONTAIN A COMMENCEMENT DATE AND THE ASSIGNEE HAS NOT BEGUN SUBSTANTIAL WORK ON THE PROPERTY. HOWEVER, YOU ARE OBLIGATED FOR PAYMENT OF ANY CONTRACTED WORK PERFORMED BEFORE THE AGREEMENT IS RESCINDED. THIS AGREEMENT DOES NOT CHANGE YOUR OBLIGATION TO PERFORM THE DUTIES REQUIRED UNDER YOUR PROPERTY INSURANCE POLICY.
8. Contain a provision requiring the assignee to indemnify and hold harmless the assignor from all liabilities, damages, losses, and costs, including, but not limited to, attorney’s fees.
Additionally, an assignment agreement cannot contain a penalty or fee for rescission, a check or mortgage processing fee, a penalty or fee for cancellation of the agreement, or an administrative fee. Further limiting the assignment, Florida Statute §627.7152(2)(c) provides that the assignment can be limited to $3,000 or 1 percent of the Coverage A limit under the policy.
If an assignment fails to contain any of the aforementioned or exceeds the scope of the limitations provided within the statute, the assignment is deemed invalid and unenforceable.
If you are a contractor or property owner trying to navigate this comprehensive statute and have questions or concerns regarding your rights and obligations, please do not hesitate to contact us to discuss further.