On December 16th, 2022, Florida’s Governor Ron DeSantis signed Senate Bill (S.B.) 2-A, a new law to help support the state’s property insurance industry. S.B. 2-A, which went into effect on the first of the year, includes many reforms to property insurance regulations. Almost all of them are designed to benefit insurers instead of homeowners in need.
The most important of the bill’s many changes is its prohibition on assigning benefits. According to the law, property owners with insurance policies issued after January 1st, 2023, may not assign their insurance benefits to another party.
Why is Florida ending the assignment of benefits? After all, it has long been a tool used by property owners to simplify the process of repairing their homes and businesses. According to the legislators in favor of banning this process, it frequently led to insurers being faced with unnecessarily high claims. They allege that prohibiting assignments of benefits will reduce the strain on insurers and eventually lead to lower prices for consumers.
However, this could take years to occur and may harm policyholders in the meantime. By removing a proven, helpful tool from property owners, the law will make it significantly harder to receive fair compensation for damage after disasters strike. It could also make finding skilled contractors to fix a property more difficult by reducing the incentives these companies receive for prompt work.
If you own property in Florida, it is in your best interest to understand how this new law could affect you. Below, we break down how the assignment of benefits process used to work, how the changes may affect you, and what you can do to ensure your next home insurance claim is paid in full.
How the Assignment of Benefits Worked Previously
Florida’s assignment of benefits process was intended to make property repairs and insurance claims easier for policyholders. It allowed property owners to assign the benefits from their insurance policy to a third party when they needed to file a claim. For example, a homeowner could grant a trusted full-service contractor the rights to the insurance benefits in exchange for guaranteeing that it would repair disaster damage in full.
When this occurred, the contractor received the authority to file claims on the owner’s behalf, make decisions about the best way to repair the property, and receive insurance payments directly from the insurer. Home repair companies could use their in-depth knowledge of the damage to ensure it was fixed correctly and fight back against insurers attempting to underpay claims. Meanwhile, the owner could relax and trust that their claim was being handled by a professional on their side.
The Impact of the Change on Homeowners in Florida
If you already have an insurance policy purchased or renewed before 2023, the new prohibition on assigning benefits does not yet apply to you. For policies issued after January 1, 2023 the right to assign benefits for this type of work has been eliminated. Insurers lobbied for this change, but policies require that property owners take action to stop the damage and prevent it from becoming worse. If a property owner does not do this the insurance company may try to use that as a basis to deny coverage and refuse to make payments. Ironically, policy holders still have the obligation to stop the damage and protect the property, but the insurance companies have made it harder to do so.
Without the ability to hand over the process entirely to a trustworthy contractor, homeowners will be required to do the following themselves:
- Submit claims to their insurer
- Document the damage on their property
- Identify the necessary repairs and report them to the insurer
- Negotiate with the insurer to receive fair compensation
They will be required to accomplish all of this on top of the already-difficult task of living in a damaged home, scheduling repairs, and handling all their other daily responsibilities.
This will clearly make recovering after a disaster more difficult. While it could eventually make insurance more affordable, it has yet to be seen whether this will come to pass. In the meantime, homeowners will likely continue facing some of the highest insurance premiums in the country while receiving fewer benefits.
Managing Your Home Insurance Claim Without the Assignment of Benefits
Without the ability to assign your insurance benefits to a third party, you will be responsible for managing much of your home insurance claim. However, you do not have to handle the process on your own. Trustworthy, professional contractors will continue to provide their services and work hard to help you prove that certain repairs are necessary.
Furthermore, whether or not you can assign benefits, property owners can still pay contractors with money from the policy by using documents known as a direction to pay and a letter of protection. The process is a little more complicated and requires the policy holder to work with a contractor and attorney who can work through the necessary steps.
- Direction To Pay: This is a document in which the property owner directs or instructs the insurance company to pay another party, such as a contractor, from the some of the money paid for the claim. Sometimes the insurance company will follow the directions and pay as instructed by the policy holder. This is helpful but it gives the contractor less rights and less control than the contractor would have had with an assignment of benefits.
- Letter of Protection: This type of letter can be used two different ways. 1) By the property owner to instruct his or her attorney to “protect” a contractor or service provider by paying the contractor’s bill from money received from the claim; and/or 2) By the insured’s attorney to assure a contractor or service provider that their bill will be paid.
Similar to the situation with attorney’s fees, these methods have been used for years in personal injury cases. Now, the same techniques can be used with property damage claims. The attorneys at The Professional Law Group are familiar with what is involved and can help. Let us know if you have questions. Learn more about how our experienced attorneys can help you receive fair compensation for your damaged property today by scheduling your free case review.