Homeowners Insurance Assignments Of Benefits May Have Finally Met Their Match

Few issues have been so hotly disputed in recent years as the issue of what constitutes a proper "assignment" of homeowners insurance benefits. Historically, the rule of assignment creation in Florida is that any instruction, document, or act that vests in one party the right to receive funds that would be due to another party operates as an assignment.i Recently, assignments of benefits ("AOB") have been accepted by some courts as a valid way for a homeowner to confer homeowners insurance policy benefits to a third party, such as a water remediation company or a roofing company.

However, on the other hand, homestead protection is a fundamental right that is enshrined in Florida's Constitution. While homestead principles do not typically arise in the insurance context, recent cases in which insurers have applied homestead law to fight AOB lawsuits involving the transfer of homeowners insurance benefits may have a profound effect on homeowners insurance law.

In Florida, a residential property is inherently instilled with homestead protection when a person acquires property and makes it his or her home. No action of the Legislature, declaration, or other act on the owner's part is required to make it the owner's homestead.ii The purpose of the homestead protection is to promote the stability and welfare of the state by securing a householder a home in which the owner and his or her heirs could live beyond the reach of financial misfortune and the demands of creditors.iii Article X, § 4 of Florida's Constitution specifically provides that homestead protection may only be devised by one of three ways: mortgage, sale, or gift. If the homeowner is married, then the alienation of homestead property requires the joinder of both spouses.

The Florida Supreme Court has held that "a waiver of the homestead exemption in an unsecured agreement is unenforceable."iv In fact, the Florida Supreme Court noted that while an exemption can be waived by mortgage, "for over a hundred years we have held that it cannot be waived in an unsecured agreement."v Further, Florida employs a strong public policy in favor of protecting homestead property, such that "an individual cannot waive a right designed to protect both the individual and the public."vi

In recognizing this strong public policy, it is well-settled in Florida that the homestead protection extends not just to the property itself, but also to insurance proceeds obtained as a result of damage to the...