Screenshot of Restoration 1's website. Screenshot of Restoration 1′s website.

In a closely watched case, a restoration firm asked the Florida Supreme Court to overturn a ruling that allowed restrictions on the controversial insurance practice known as “assignment of benefits.”

Attorneys for Restoration 1 of Port St. Lucie filed a 45-page brief at the Supreme Court arguing that the Fourth District Court of Appeal improperly backed restrictions placed on a policy by Ark Royal Insurance Co. in a St. Lucie County dispute involving water damage to a home.

Assignment of benefits, or AOB as it is widely known, has been one of the most-controversial insurance issues in the state Capitol in recent years and will spur a fight during this spring’s legislative session. The brief was filed just hours before the Senate Banking and Insurance Committee was scheduled late Monday afternoon to take up a bill that would limit attorney fees in AOB disputes, a key issue for insurance companies.

In assignment of benefits, homeowners in need of repairs sign over benefits to contractors, who ultimately pursue payments from insurance companies. Insurers contend that the practice has become riddled with fraud and litigation, while plaintiffs attorneys and other groups say it helps make sure claims are properly paid.

Restoration 1 of Port St. Lucie filed a lawsuit against Ark Royal Insurance Co after policyholders John and Liza Squitieri sustained water damage to their home. Liza Squitieri contracted with Restoration 1 to do cleanup work and assigned the benefits to the firm.

Ark Royal, however, refused to pay the full amount requested by the restoration firm, pointing to an insurance contract that required approval from the husband, wife and the Squitieris’ mortgage company, PNC Bank, for benefits to be assigned to the contractor. Restoration 1 claimed breach of contract but lost in circuit court and at the Fourth District Court of Appeal.

In the brief Monday at the Supreme Court, attorneys for Restoration 1 argued that insurance regulators have rejected such restrictions on assignment of benefits.

“To be clear, Ark Royal’s requirement that an AOB be signed by the mortgagee [the mortgage company] makes an insured’s post-loss assignment of benefits a practical impossibility,” the brief said. “Allowing it to stand not only eliminates an insured’s right to freely assign post-loss claims, but also does an end-around the normal legislative and regulatory processes that are in place to protect the citizens of Florida from such an overreach.”

The brief also contended that the restrictions are aimed at achieving the “insurance industry’s ultimate objective of eliminating AOBs.”

The case went to the Supreme Court after the ruling by the Fourth District Court of Appeal conflicted with a ruling by the Fifth District Court of Appeal.

Security First Insurance Co. took a case to the Fifth District Court of Appeal after the Florida Office of Insurance Regulation rejected a company proposal to add similar AOB restrictions to policies. A panel of the appeals court upheld the position of the Office of Insurance Regulation.

The Supreme Court has agreed to take up the St. Lucie County case but has not scheduled oral arguments. Ark Royal is expected to file its initial brief next month.

As a sign of the heavy interest in the case, the Supreme Court has received requests from a variety of groups on both sides to file friend-of-the-court briefs. For example, an insurance industry group known as the Personal Insurance Federation of Florida, the Florida Insurance Council, the Property Casualty Insurers Association of Florida and the Florida Bankers Association filed a request in November to submit a brief on behalf of Ark Royal.

“This issue is of significance to property insurers throughout the state, who are often confronted with post-loss assignments of benefits which have not been executed by all parties who have an interest in the insured property,” the request said. “This issue is likewise of significance to banks who hold the mortgages and therefore have property interests in these properties, with a significant interest in ensuring that repairs are properly made, and with the consent of the mortgagee, as required in the mortgage agreements.”

Jim Saunders reports for the News Service of Florida.