shutterstock_1005703702When it comes to property insurance claims, particularly those under a homeowner’s insurance policy, an insured will oftentimes assign its benefits under the policy to a restoration contractor.  The request for the assignment may likely be prompted by the contractor that does not want to perform the work without the assignment of benefits.  The assignment of benefits (also known by the acronym “AOB”) allows the third-party contractor (as the assignee of the insured) to sue the insurer directly for benefits under the policy associated with the restoration work.  


Recently, the Fourth District Court of Appeal found enforceable a provision in a homeowner’s insurance policy that stated, “[n]o assignment of claim benefits, regardless of whether made before a loss or after a loss, shall be valid without the written consent of all ‘insureds,’ all additional insureds, and all mortgagee(s) named in this policy.”   Restoration 1 of Port St. Lucie v. Ark Royal Ins. Co., 43 Fla.L.Weekly D2056a (Fla. 4th DCA 2018).  This meant that for the assignment of benefits to be valid, all insureds and the insured’s mortgagee had to sign off on the assignment.


In this case, the restoration contractor got the assignment of benefits signed by the wife-insured, but the assignment was not signed by the husband-insured or the mortgagee.  Based on this, the insurer denied payment to the restoration contractor.  The restoration contractor sued the insured based on the assignment and the Fourth District affirmed the trial court in dismissing the complaint holding that the language of the assignment of benefits provision in the policy is enforceable (meaning the contractor needed the written consent of all insureds and the mortgagee in order to effectuate a valid assignment). 


Regardless of your feelings about assignment of benefits, the language in the homeowner’s policy must be reviewed to ensure compliance with any assignment of benefits language in the policy. 



Please contact David Adelstein at or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.


shutterstock_376553491What is factoring?  Have you heard this term used in the business context?   Factoring is not uncommon in the business world.  It comes up when a business is in need of cash (immediate cash flow) and sells/assigns money owed under accounts receivable to a third party known as a factor.  The factor purchases the accounts receivable at a discount in consideration of an assignment of the full value of the accounts receivable from the debtor (the entity that owes the money under the accounts receivable).   The factoring arrangement is a recognized relationship, implicates Florida’s Uniform Commercial Code, and places obligations on the debtor to pay the factor directly for the accounts receivable upon notice of the assignment. 


The recent opinion in Department of Transportation v. United Capital Funding Corp., 42 Fla. L. Weekly D980b (Fla. 2d DCA 2017) does a good job describing factoring:


Factoring is a financial arrangement through which a business can obtain immediate funding from a third party by using its accounts receivable — sums owed to the business by its customers, usually on invoices for goods sold or services provided — as consideration. In a factoring arrangement, the business sells its accounts receivable to a third party, called a factor, at a discount from their face value. The factor takes ownership of the accounts receivable and, as a consequence, takes the sole right to receive the entirety of payments previously owed to the business. Ordinarily, the factor notifies the debtor on the sold accounts of the change in ownership and thereafter receives payments directly from the account debtor.


Factoring relationships implicate Article 9 of the UCC [Uniform Commercial Code] because Article 9 applies to the sale of accounts, including accounts receivable. In that connection, section 679.4061 defines the rights and obligations of the business that originates and sells the accounts receivable, the debtors on the accounts, and the third parties to whom the accounts are sold. As applied to a factoring arrangement, the statute provides that an account debtor makes payments to the business originating the account until such time as it is notified by either the business or the factor that the account has been assigned to the factor. Once that notification is given, an account debtor must make all further payments to the factor, subject to a right of the account debtor to demand proof from the business or the factor that the account has in fact been assigned. The statute also provides that any term in an agreement between the business originating the accounts and its debtors that prohibits or restricts the assignment of the accounts is ineffective.


One effect of the statute is to place an account debtor at risk if, after it receives notice of the assignment, it continues to pay the business that originated the account instead of the factor who bought the right to be paid under it. The statute provides that a payment made to the business after notice has been given does “not discharge the obligation” owed by the account debtor on the account. An account debtor who continues to pay the business that originated the account after receiving notice that the account has been assigned can be held liable to the factor for the full amount of the account notwithstanding its payment of that same amount to the business.  This is sometimes referred to as a risk of double payment.

United Capital Funding Corp. (internal citations omitted but relying on Florida Statute s. 679.4061 in Florida’s Uniform Commercial Code).


United Capital Funding Corp. describes the application of factoring in a service context.   In this case, the Florida Department of Transportation contracted an entity to perform roadside maintenance services.  The entity agreed to perform the service and the Department agreed to pay the entity for the service (no different than any other service contract).   The entity was in need of funding and entered into a factoring agreement wherein it assigned its accounts receivable under its contract with the Department to the factor.  The factor notified the Department that all future payments under the Department’s contract with the entity should be made to the factor.  The Department received the letter, but nevertheless made payment directly to the entity.


The factor sued the Department and the trial court, affirmed by the Second District, held that the Department was required to pay the factor directly, and not the entity. Even though the Department was a governmental entity, it was not exempt from complying with the requirements of paying the factor directly after receiving proper notice.  Thus, the Department, in order to discharge any contractual obligations under the accounts receivable, had to pay the factor (that was assigned the accounts receivable); failure to make these payments made the Department liable to the factor for these payments, hence the risk of double payment.



If you receive notification from a factor requiring you to make payment directly to it under an account receivable you owe to another, do NOT ignore it.  You do not want to be on the hook twice for the same payment.


Please contact David Adelstein at or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.