Fla. Courts Upholding Appraisal Clauses that Bar Assignment of Benefit Cases

A Florida appeals court has upheld the dismissal of no fewer than 16 auto glass assignment-of-benefits lawsuits against Progressive Insurance companies, perhaps putting an exclamation point on the enforceability of appraisal clauses and policy language that bars claims litigation.

The 5^th District Court of Appeals, based in Daytona Beach, this week decided with no comment that the county court in Orange County was justified in dismissing the lawsuits. All of the suits were filed by well-known Orlando plaintiffs’ attorney Earl Higgs on behalf of six automobile glass-replacement companies

In several cases, including At Home Auto Glass vs. Progressive American Insurance Co., the glass shop sued because Progressive did not pay the full amount of the submitted bill for replacing a windshield. Driver Mary Cargle had assigned benefits to At Home. But Orange County Judge Amy Carter tossed the suit, noting that the auto policy mandates that differences of opinion on the claim amount go to a third-party appraiser, and that “the policy states that the defendant cannot be sued unless there is full compliance with all the terms of the policy.”

Higgs and the defense attorney for Progressive, Lissette Gonzalez of the prominent insurance defense firm, Cole, Scott & Kissane, could not be reached for comment. But other judicial experts in Florida said the rulings underscore that insurance policies can, in fact, require that insureds comply with policy terms.

“I think a party to a contract always can waive their right to sue or make it contingent on their meeting defined prerequisites,” said Robert Jarvis, professor of law at Nova Southeastern University law school in Fort Lauderdale.

Such clauses make sense, he said, because they force policyholders to try to work things with the carrier “rather than simply running off to court and filing a lawsuit.”

Michael Packer, with the Marshall Dennehey firm, said that courts have allowed some insureds a little leeway, or “substantial compliance” with the policy. But for assignees of benefits, such as the auto glass companies, courts often hold them to a stricter standard.

“The courts have grown exhausted by the AOB lawsuits and are less forgiving when they fail to comply with one or more post-loss conditions,” Packer said in an email.

A number of insurance company officials have said that AOBs lie at heart of the proliferation of litigation that has cost Florida insurers millions of dollars in recent years and has helped drive several into insolvency. Data from the Florida Office of Insurance Regulation shows that from 2017 to 2020, the severity of homeowner AOB claims were almost double that of claims without AOBs.

Some in the industry have said that the Florida Legislature, due to convene in another special session next month, may take further steps to curtail AOB litigation.

At a previous special session in May, lawmakers banned the awarding of attorney fees for plaintiffs in most AOB cases. That came after 2019’s reform measure, which put a number of other restrictions on assignments of benefits and litigation.

As much as homeowner AOB claims, auto glass claims have long been a thorn in the industry’s side, and industry advocates have blamed installers for an explosion of claims with inflated prices, and for filing suit too quickly. In recent years, the insurance industry backed legislation that that would have prohibited repair shops from offering anything of value to customers in exchange for making insurance claims for glass replacement and repair, but the measures did not survive.

In some of the recent Progressive cases, the assignee auto shops sent the bill, for more than $1,000, to the insurer, which paid only part of it. Progressive argued that the policy requires that an appraisal process be utilized to decide the payable amount.

“We recognize that a dispute exists with respect to the amount that is necessary to repair or replace the windshield, and the purpose of this letter is to explain that the insurance policy provides that an appraisal is the method to be used to resolve the disagreement,” Progressive wrote to Apex Auto Glass in one dispute. “Although you may have provided a purported assignment of benefits, this correspondence does not waive any of the defenses we may have regarding the same. Specifically, we are hereby treating the assignment of benefits as a direction to pay and have issued the payment due pursuant to the policy language. Should you file suit naming our customer as the assignor, we reserve the right to assert defenses pertaining to the purported assignment of benefits.”

Progressive’s motion to dismiss the suit was based in part on its contention that Apex did not participate in the appraisal process. The glass shops argued that, among other issues, the insured was unable to locate the policy at the time the claim was failed, so could not know of its requirements, that an appraisal was cost-prohibitive, and that appraisal was not appropriate because the dispute was over coverage, not price.

The county court sided with Progressive on all counts.