A constant struggle for Florida insurers is how to handle partial claim payments when the Insured assigns benefits under the Policy to entities that are not a party to the insurance contract, like mold mitigation and testing vendors. This is especially true when there may be insufficient limits available due to a mold or water limitation, or when considering how to apply the deductible. A recent Fourth District Court of Appeal decision highlights the conflicting viewpoints on how an insurer should handle these disputes.

The majority of the Court held that an Insurer did not breach the Policy by issuing an undisputed claim payment to both the Insured and AOB, and sending the check to the Insured’s address (instead of the AOBs). One judge disagreed, concluding that the insurer should have issued the payment directly to the AOB without the insured on it.

The outcome of this case turned largely on the facts, specific Policy language and AOB contract language. It is a great example of the unsettled law on an important issue in first-party property claims. The Court provided guidance on how to analyze the Insurers’ Policy and AOB agreement to determine where to send claim payments. If you are deciding how to handle AOB claims, WSHB’s coverage team is ready to help you navigate this evolving area of law.


This case involved a covered Hurricane Irma loss. The insured assigned rights to a mold vendor. The mold vendor’s AOB provided in part as follows:

  • The insured agreed to cooperate with the assignee to ensure that payments were made by the insurer immediately upon completion of work.
  • The insured understood that the assignee was working for the insured and not the insured’s insurance company.
  • Direction to Pay: The insured demanded and authorized any applicable insurer to pay the assignee solely and directly for the services provided, without the need to include the insured or any co-insured as a payee.
  • Assignment: The insured assigned to the assignee any and all insurance rights, benefits, and proceeds which pertain to services rendered in relation to the above loss, under any applicable policy of insurance. This assignment of rights, benefits and proceeds was limited to the amount of the assignee’s invoice for services rendered in relation to the above claim and the right and ability to collect same directly from my insurer, including the right to file suit and to seek attorney’s fees and court costs
  • Limited Power of Attorney: The insured appointed the assignee as the insured’s attorney in fact to endorse and deposit any payments made by any source for services rendered by the assignee which may include the insured’s name as a co-payee.
  • The Insured gave the AOB authority to endorse any check with the Insureds name on it.

The mold vendor submitted a $1,995 invoice to the Insurers totaling $1,995,000, followed by a 10-day payment demand. The insurer issued an undisputed payment for the full amount of the invoice to the insured’s mailing address. The check was made out to both the insured and the assignee. The check was never cashed.

The AOB filed a lawsuit against the insurer for breach of contract. In response, the insurer deposited the funds with the Court and offered to re-issue the check to the assignee in exchange for a dismissal of the claim against them. The insurer also filed its answer and affirmative defenses, including the assertion that the assignee was not entitled to attorney fees because the assignee was not forced to file a lawsuit to get payment, and that the assignee had failed to adhere to the Policy provision that required, “If you and we fail to agree on the settlement regarding the loss, prior to filing suit, you must notify us of your disagreement in writing.”

Both sides filed motions for summary judgment. The insurer argued that all funds due were paid long before the assignee ever brought suit and that the AOB failed to advise the Insurer in writing of any disagreement prior to filing suit. The AOB argued that the AOB agreement put the insurer on notice that the claim payment should go solely to the AOB.

The trial court agreed with the insured, finding that the check was issued, although never negotiated, well before this lawsuit was filed by the assignee.

Appellate Court’s Analysis

The majority of the court looked to contract principles to determine that the insurer had not breached the Policy, even if its actions were inconsistent with the terms of the AOB agreement. The court determined that the insurer was not bound by the AOB agreement’s terms, because it was not a party to the AOB agreement. Although the AOB agreement gave the assignee the qualified right to enforce the insurance policy, it did not grant the AOB the right to enforce against the insurer terms of the AOB agreement that are extraneous to the Policy.

While the AOB agreement specifically stated that the check issued for payment could include the insured, and reflected a clear preference that payment be issued directly to the assignee, the AOB agreement contemplated and addressed what would happen if the check was made payable to both the Insured and AOB. It included a limited power of attorney that stated, “the insured hereby appoints the assignee as the insured’s attorney in fact to endorse and deposit any payments made by any source for services rendered by the assignee which may include the insured’s name as a co-payee.” It also expressly provided authority to the assignee to endorse any check that included it as a payee even if the insured was also listed.

In addition, the AOB agreement included a provision requiring the insured to take whatever steps necessary to ensure that payment from the insurer is sent in a timely manner to the assignee. This provision stated that the insured must notify the assignee of any payments made by the insurer and forward it accordingly. If the insured found disagreement with the amount or method of payment made by the insurer, it was required to inform the insurer of the problem pursuant to the terms of the insurance policy. The majority opinion held that the insured’s failure to take either action to ensure that the assignee received the payment forwarded by the insurance company cannot be imputed to the insurer, as it was not a party to the AOB agreement and was not put on written notice by its insured of any disagreement regarding the manner of payment.

Based on this, the majority of the court determined that the trial court correctly entered summary judgment in favor of the insurer.

The dissenting judge laid out the arguments for why the insurer should not have placed the insured on the check, and should have sent the check solely to the AOB. The dissenting position relied on the Policy terms, Florida’s Uniform Commercial Code, and Florida’s claims handling statutes to determine that the trial court and majority position was incorrect.

Key Takeaways

  • Florida courts can take differing approaches on how to analyze claim payments to AOBs.
  • The majority of the Fourth District Court of Appeal held that an insurer is not in privity of contract with regard to the AOB agreement signed by an Insured and assignee.
  • The majority held that an insurer was not required to comply with the AOB agreement terms that are extraneous to the Policy.
  • The insurer issuing a check listing both the insured and the assignee as payees was sufficient where (1) there was a qualified assignment, and (2) the insured did not inform the insurer of any improper payment method or amount, as required by the Policy.
  • The dissenting position would have entered judgment for the AOB, on the grounds that the check was not solely direct to the AOB and the carrier did not provide proper acknowledgment to the AOB under Florida’s claims handling statutes.
  • It is important to analyze the terms of the Policy, and the type of assignment agreement when navigating how to issue a claim payment to multiple parties.

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