In a recent per curiam opinion, Florida’s Fourth District Court of Appeals affirmed the lower court’s finding that an assignment of benefits agreement as to insurance proceeds is invalid and unenforceable because it is an unsecured agreement which attempts to divest the Insureds of constitutionally protected homestead rights. In One Call Prop. Servs. v. St. Johns Ins. Co., No. 4D14-4585, 2016 Fla. App. LEXIS 1126 (4th DCA Jan. 28, 2016), the homeowner Insureds suffered a water loss and subsequently retained One Call to perform water mitigation services at their home. Only one of the Insureds, Carl Schlanger, executed the assignment of benefits agreement (“AOB”), which purported to assign any and all applicable insurance rights, benefits, and proceeds to One Call in exchange for water mitigation services.
The Insureds then submitted a claim under their homeowners policy to St. Johns, which ultimately denied the claim. One Call, as an assignee of the Insureds, filed suit against St. Johns, and sought payment for the unpaid water mitigation invoice. St. Johns moved for summary judgment in the trial court, arguing that (1) One Call lacked standing to maintain the suit because the AOB is invalid under Florida law as it seeks to divest the Insureds of homestead property through an unsecured agreement and (2) even if the AOB was a secured agreement, it is still invalid because it was not signed by the other Insured, June Schlanger. In response, One Call argued that the homestead protection did not apply because it was seeking insurance benefits for water mitigation services not homestead benefits. One Call also argued that Carl Schlanger had the ability to bind his wife by contract, so the AOB did not violate the homestead provision’s requirement of joinder of spouses.
To supports its argument that insurance proceeds from homestead property cannot be assigned through such an unsecured agreement, St. Johns cited Quiroga v. Citizens Prop. Ins. Corp., 34 So. 3d 101 (Fla. 3d DCA 2010). There, the court had considered whether a contingency fee agreement between a homeowner and his attorney was valid where it sought to divest the homeowner of homestead-protected insurance proceeds obtained by his attorney. In that case, the Third DCA cited the well-settled rule that when “a homestead is damaged through fire, wind or flood, the proceeds of any insurance recovery are imbued with the same privilege,” holding that the homeowner cannot, as a matter of public policy, divest himself of homestead property through an unsecured agreement, such as a contingent fee agreement. Much like Quiroga, the AOB in this case is an unsecured agreement because it is not secured by collateral, but rather, potential insurance proceeds.
In response to One Call’s argument that Mr. Schlanger could bind his wife by contract to allow the assignment, St. Johns responded that even assuming the AOB was a secured agreement, Florida law requires joinder of both spouses where there is an attempt to alienate homestead property. Florida’s Homestead protection, Fla. Const. art. X, §4(c), provides in relevant part, that “The owner of homestead real estate, joined by the spouse if married, may alienate the homestead by mortgage, sale or gift…” Because the homestead property was owned by both Mr. and Mrs. Schlanger, any attempt to alienate the property, or insurance proceeds resulting from damage to the property, required joinder of both spouses.
The trial court granted final summary judgment in favor of St. Johns in November 2014, finding, in relevant part, that the AOB was invalid as it sought to divest the Insureds of constitutionally protected proceeds from homestead property. The court did not reach the argument regarding joinder of spouses. One Call appealed to the Fourth District, but the appellate court affirmed in a per curiam opinion.
While this case is not binding precedent given the per curiam opinion, it does create persuasive authority for the proposition that AOBs covering homestead property are invalid as a matter of law and do not confer standing on the assignee. Even though this opinion applies to only homestead property, its impact is quite significant. While the percentage of homestead protected properties in Florida is not readily available, the financial and legal advantages of homestead status suggest that the figure is greater than fifty percent. Given the recent proliferation of law suits filed against home insurers by water mitigation companies, plumbers, and mold remediators pursuant to AOBs, this opinion will undoubtedly challenge the ability of those types of assignees to recoup unpaid invoices through litigation. Thus, even though the One Call opinion is limited to homestead property, it may have a broad application for insurance carriers, homeowners, and service providers, alike.