Analysis and Interpretation by Michael A. Cassel
On April 10, 2015, the Fifth District Court of Appeals of the State of Florida (“5th DCA”) released their decision in Accident Cleaners, Inc., a/a/o Joseph Gerena v. Universal Insurance Company, Etc., Case No. 5D14-352, 40 Fla. L. Weekly D862a. The Gerena court specifically deals with the insurable interest a mitigation company holds with regards to a post-loss assignment of insurance rights and benefits.
The facts of the underlying insurance claim are fairly straight forward, albeit limited, as set forth in the Garena opinion. Universal Insurance Company (hereinafter “Universal”) issued a homeowner’s property insurance policy to Joseph Gerena (hereinafter the “insured” or “assignor”). The insured sustained a loss to his property caused by a “decomposing body” and contacted Accident Cleaners, Inc. (hereinafter “Plaintiff” or “assignee”), to perform emergency cleanup and construction services. Plaintiff then submitted invoices for said services but Universal “failed to pay the full amount”[i] of the invoices submitted leading to Plaintiff filing suit. Universal filed a motion to dismiss alleging that Plaintiff lacked an insurable interest in the subject property and, therefore, lacked the ability to file suit. Ultimately, the lower court dismissed Plaintiff’s complaint with prejudice stating that Plaintiff did not have an insurable interest in the insured property at the time of loss as required by Section 627.405, Fla. Stat.
5th DCA Opinion
The 5th DCA reversed the lower court’s decision stating that a valid post-loss assignment imputed the insured’s insurable interest in the subject property to the Plaintiff and, as such, Plaintiff’s Complaint should not have been dismissed. It must be noted that this is not a novel idea with regards to the area of assignment law. As referenced in the Garena opinion, the Florida Supreme Court previously established the precedent that an insured may assign their rights to a policy without consent from the insurance company after a loss. See West Florida Grocery Co. v. Teutonia Fire Ins. Co., 74 Fla. 220, 224 (Fla. 1917) (“The policy was assigned after loss, and it is a well settled rule that the provision in a policy relative to the consent of the insurer to the transfer of an interest therein, does not apply to an assignment after loss.”); see also Cont'l Cas. Co. v. Ryan Inc. E., 974 So. 2d 368, 377 (Fla. 2008) (reaffirming the principle from W. Fla. Grocery Co. that the law is well-settled that anti-assignment provisions do not apply after loss). Based on this long established precedent, it is wholly unclear as to why the lower court ever ruled in Universal’s favor on the grounds alleged thereby leading to the publication of the redundant opinion in Gerena.
Impact and Effect
Currently, there are three (3) cases pending before the Fourth District Court of Appeals (hereinafter “4th DCA”) pertaining to issues regarding a post-loss assignee’s standing to bring suit.[ii] While each of the pending 4th DCA cases deal with separate arguments as to why a post-loss assignee lacks standing, the argument that the assignee lacks an insurable interest under the terms of Section 627.405, Fla. Stat., is, at most, a minimal aspect of their arguments seemingly included as a formality.
In the author’s opinion, the strongest argument against a post-loss assignee’s standing to bring suit comes in matters wherein the insured’s claim was denied in its entirety. This is due to the fact that “a loss payee can only recover to the extent the named insured can recover.” Transamerica Leasing, Inc. v. Inst. of London Underwriters, 267 F.3d 1303, 1307 (11th Cir. Fla. 2001); see also Couch on Insurance § 65:22 (3d ed. 1996) ("Loss payee's rights under insurance policy are derivative of named insured's rights; when named insured has no right to recover, loss payee cannot recover under policy."). Accordingly, in a circumstance where no insurance benefits have become due to the insured, the insured does not have any benefits to assign to any assignee. See Resolution Trust Corp. v. Broad & Cassel, P.A., 889 F. Supp. 475, 478 (M.D. Fla. 1995) (“A valid assignment only transfers to the assignee whatever rights the assignor possessed.”).
This argument is strengthened in matters where the insurer’s denial is based on an insured’s failure to comply with post-loss conditions and/or conditions precedent. The court in Shaw v. State Farm discusses this further stating that “[i]f no monies are due and owing because of the failure of [the insured] to perform some covenant under the policy… then [the assignee] has no claim against [the insurer], precisely because it is subject to [the insurer]’s defenses against the insured.” Shaw v. State Farm Fire & Cas. Co., 37 So. 3d 329, 333 (Fla. 5th DCA 2010).
Based on the foregoing analysis, while some are celebrating the Gerena decision as a victory for homeowners, it was merely a victory for Accident Cleaners, Inc., and it in no way affects the well-established aspects of assignment law in Florida. The, as of yet, unwritten 4th DCA opinions will likely have a much greater effect on this area of first party property insurance law.
[i] It must be noted that the opinion does not state whether the allegation of Universal’s failure to “pay the full amount” means Universal underpaid the requested amounts or denied the insured’s claim in full. This differentiation is important as further discussed in this analysis.
[ii] The three (3) cases pending in the 4th DCA are as follows: ASAP Restoration and Construction, Inc. v. Tower Hill Signature Inc. Co., Case No. 4D13-4174; One Call Property Services, Inc., et al. v. Security First Insurance Company, Case No. 4D14-424; and Emergency Services 24, Inc., etc. v. United Property & Casualty Ins. Co., Case No. 4D14-576. Oral arguments went forward on all three (3) cases on March 24, 2015; however, no opinions have been published as of yet.