Court Finds Third Party Servicing Company’s Purchase of Contractor’s Recieivables is an Unenforceable Assignment of Benefits Under 627.7152, Florida Statutes
Citizens Property Insurance Corporation v. Black Diamond Funding Ventures, LLC, involves the application of 627.7152, Florida Statutes, to a third-party purchaser of an assignment agreement. The underlying facts are straightforward: following a loss, a homeowner executed a written assignment of benefits agreement with a contractor, who then provided certain remediation services to the homeowner. The contractor then sold its right to payment for those services, and its right to sue, to a third-party servicer that was in the business of acquiring receivables from companies that it would then try to collect. The third-party servicer then sued the homeowner’s insurance carrier, relying on the assignment of benefits and the contractor’s unpaid invoices. The trial court entered final judgment in favor of the third-party servicer, and the insurance carrier appealed, arguing that 627.7152, Florida Statutes, governed the transfer of the assignment of benefits to the third-party servicer.
On appeal, Florida’s Fourth District Court of Appeal first noted that the question was whether “section 627.7152 regulates not only the initial insured-to-contractor assignment, but also subsequent transfers of post-loss benefits.” The court then turned to the definition of an assignment agreement found in 627.7152, Florida Statutes, noting that it was a broad definition with three parts: “(1) any instrument (2) by which post-loss insurance benefits are acquired in any manner (3) to or from a person providing services to protect, repair, restore, or replace property or to mitigate against further property damage".”
The court then looked at the agreement between the contractor and the third-party servicer. Specifically, the Court noted the following provisions in the agreement as demonstrating that the third-party servicer acquired post-loss benefits:
direct payment to third-party servicer] from the insurance company”; [third-party servicer] “has the right to ... bring suit or otherwise enforce collection in the name of the Service Provider/Insured(s)”; and the agreement terminates upon [third-party servicer's] “receipt of the full payment of [purchased] invoices ... from the insurance company for such services rendered.
While the third-party servicer argued that the language of 627.7152, Florida Statutes, indicates that it is only intended to apply to contractors, the Court concluded that the definition of assignment agreement chosen by Florida’s legislature was broader than some other portions of the statute, and therefore applied to these circumstances. The Court concluded as follows:
The fact that certain statutory requirements may fit imperfectly in the context of a downstream financial entity does not permit narrowing the statutory definition where the entity has acquired the right to collect and enforce post-loss policy benefits. Rather, under the statutory framework, a noncompliant assignment agreement is rendered invalid and unenforceable. In sum here, because the Purchase Agreement qualifies as an “assignment agreement” subject to section 627.7152, yet fails to comply with section 627.7152, the agreement is invalid and unenforceable, and [the third-party servicer] thus lacked standing to sue [the insurance carrier.]
The Court then reversed judgment in favor of the third-party servicer.
About the Author:
Jason Lambert is a Florida Board Certified Construction Attorney and Partner in the Construction Industry Practice Group at Hill Ward Henderson, in Tampa, Florida. He is also the founder and chief contributor to the Hammer & Gavel construction law blog. Jason focuses his practice on representing contractors, subcontractors, and materials suppliers throughout the state of Florida. Before law school, Jason spent a decade working in the construction industry, primarily as a project manager and operations director for both new construction and remodeling. He can be reached at jason.lambert@hwhlaw.com or 813-227-8495.
