Restoration Contractors Claim New Florida Property Insurance Laws Unconstitutional

Restoration Association of Florida (RAF) and a restoration contractor did not let Florida Governor DeSantis’ ink dry before filing a lawsuit seeking to quash the new property insurance legislation. RAF recently filed a lawsuit against Florida’s Insurance Commissioner, as noted in last month’s post, Restoration Association Accuses Florida Insurance Commissioner of Unconstitutional Conduct.

The relevant argument to the most recent lawsuit is found in these allegations:

1. In a just-completed special session, the Florida Legislature approved legislation that unconstitutionally targets assignment of benefits (AOB) contracts executed between a homeowner and his or her contractor of choice. Rather than address factors within the property insurance industry that has led to its problematic volatility, the Florida Legislature chose to violate the constitutional rights of contractors – the individuals and businesses that repair the homes and commercial buildings owned by Floridians damaged by extreme weather events such as hurricanes.

2. SB 2-D prevents contractors, as holders of AOBs, from recovering their attorneys’ fees in the event they prevail against insurers in litigation – otherwise known as prevailing party fees. The deprivation of this right is significant because SB 2-D wrongfully treats contractors, as assignees, disparately from homeowners and insurers.

3. Critically, SB 2-D leaves intact (i) the right of a homeowner to recover prevailing party fees against an insurer in a lawsuit not commenced by an assignee; (ii) the right of the insurer to recover prevailing party fees in a lawsuit regardless of whether it is commenced by the homeowner or an assignee; (iii) the assignee’s obligation to indemnify and hold a homeowner harmless for all losses; and (iv) the requirement that the contractor waive all rights of recourse against the homeowner when the insurer does not pay all outstanding amounts owed. Such disparate treatment of contractors performing work under an AOB is unconstitutional under the equal protection clause of the Florida Constitution.

4. SB 2-D also has the effect of denying these contractors due process and access to the courts, a fundamental right under the Florida Constitution. Claims submitted to insurers for work performed by contractors under an AOB are generally not large in monetary amount. When the insurer delays, underpays, or does not pay a claim at all, contractors are forced to commence an action against the insurer to recover the full amount due for the work performed.

5. Without the corresponding right to recover prevailing party fees, SB 2-D makes it economically unfeasible for the contractor to pursue its lawful rights and remedies in court. Invoices for work performed by contractors under AOBs are generally not significant enough for a lawyer to agree to represent the contractor on a contingency fee basis and it is not economically reasonable for the contractor to a pay a lawyer on an hourly basis to recover the amount(s) owed.

6. Additionally, contractors that perform emergency services under an AOB typically are capped at $3,000 for services rendered. In this instance, stripping away the rights of emergency services contractors to recover prevailing party fees will virtually guarantee this sector of the industry is put out of business. Denying contractors access to the courts and to due process violates the Florida Constitution.

The case asks for injunctive relief so it may move along quickly. Who will win? I do not know. But the allegations of this complaint are exactly what the insurance industry and its lobbyists were hoping for—putting contractors who rely upon AOB litigation to force payment out of the insurance restoration business as it currently exists.

I highlighted “as it currently exists” to reference my prediction that the property insurance industry, in many parts of the country, wants to move to a “managed repair” in the same manner as we have our lousy medical insurance—“managed care.” The problem with both systems is that the insurance companies ultimately control the managing of what we hold most precious—our health and homes.

I will write more about that tomorrow.

Thought For The Day

Perfection is not attainable, but if we chase perfection we can catch excellence.
—Vince Lombardi