SFR SERVICES, LLC

v.

INDIAN HARBOR INSURANCE COMPANY

Plaintiff SFR Services, LLC (“SFR Services”) is the purported assignee of an insurance policy issued by Defendant Indian Harbor Insurance Company (“Indian Harbor”) to Fairway Villas at Banyan Trace Condominium Association, Inc. (“Fairway Villas”). Indian Harbor denied Fairway Villas’s claim for coverage under the policy for damage to the insured property allegedly caused by Hurricane Irma. Fairway Villas assigned its claim for insurance benefits to SFR Services, which then sued Indian Harbor in Florida state court for breach of contract. Indian Harbor removed the suit to federal court, and then moved to dismiss the complaint, arguing that the assignment of benefits from Fairway Villas to SFR Services was invalid under Fla. Stat. § 627.7152. As discussed below, Indian Harbor’s motion to dismiss (Doc. 6) is DENIED.

BACKGROUND

The insurance policy was in effect when Hurricane Irma passed through the area allegedly damaging the insured property. (Doc. 1-1 ¶ 5.) Fairway Villas submitted an insurance claim to Indian Harbor, which retained an engineer to inspect the property. (Id. ¶¶ 8, 10.) On September⁵, 2019, Fairway Villas executed an Assignment of Insurance Benefits (“AOB”) in favor of SFR Services, “assigning all insurance rights, benefits, and proceeds of [Fairway Villas’s] claim to SFR Services.” (Id. ¶ 11.) SFR Services inspected the insured property and prepared an estimate dated September 28, 2019, totaling $692,452.67 in replacement costs. (Id.

¶ 22.) On or about October 26, 2019, Indian Harbor’s engineer opined that the damage to the property was not the result of Hurricane Irma. (Id. ¶ 10.) As a result, on December 19, 2019, Indian Harbor denied Fairway Villas’s claim in its entirety. SFR Services then retained a professional engineering company, ButlerMatrix, to evaluate the cause and extent of the damage to the insured property. (Id. ¶ 20.) In a report dated April 13, 2020, ButlerMatrix set forth its conclusion that the damage to the proper was the result of high winds from

Hurricane Irma. (Id. ¶ 21.) SFR Services filed a breach of contract action against Indian Harbor in state court on July 10, 2020. Documents attached to the state court complaint include the insurance policy (Exhibit A) (id. at 9), the AOB (Exhibit B) (id. at 117), the ButlerMatrix report (Exhibit C) (id. at 119), and SFR Services’s September 28, 2019 estimate (Exhibit D) (id. at 152).1 Indian Harbor removed the state court complaint to this Court on August¹², 2020. (Doc. 1.) On August 19, 2020, it moved to dismiss the complaint, arguing that the AOB violates Fla. Stat. § 627.7152 and is therefore invalid and unenforceable. (Doc. 6.)

LEGAL STANDARD

A plaintiff states a claim for relief sufficient to avoid a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) when the complaint “contain[s] sufficient factual matter, accepted as true, to state a claim that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). A party must plead more than

“labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). A court’s consideration of a Rule 12(b)(6) motion is limited “to the pleadings and exhibits attached thereto.” Grossman v. NationsBank, N.A., 225 F. 3d 1228, 1231 (11th Cir. 2000) (internal quotations omitted).

DISCUSSION

Section 627.7152 of the Florida Statutes (“the Act”), was enacted by the

Florida legislature in 2019 to regulate assignment agreements that seek to transfer insurance benefits from the policyholder to a third party. Specifically, assignment agreements to which the Act applies are defined as: [A]ny instrument by which post-loss benefits under a residential property insurance policy or commercial

A. WHETHER THE ACT APPLIES TO THE AOB IN THIS CASE

As an initial matter, SFR Services argues that the Court should deny Indian Harbor’s motion to dismiss because applying the Act to the AOB here would violate the rule against retroactive application of statutes that affect a party’s substantive rights. (Doc. 13 at 3–4.) SFR Services asserts that, although the AOB was executed after the July¹, 2019, enactment of Fla. Stat. § 627.7152(13) (hereinafter “subsection 13”), which changed the requirements for an insured to assign its benefits under an insurance policy to a third party, the insurance policy was issued prior to the enactment of subsection 13––and the entire Act, of course. According to SFR Services, applying the Act to an AOB that assigned rights under an insurance policy issued prior to its enactment would alter or impinge substantive rights under the policy that existed before the Act was passed. The Court disagrees. Because in this case the statute was enacted after the issuance of the insurance policy, the operative inquiry is whether the statute should apply retroactively. See Menendez v. Progressive Exp. Ins. Co., Inc., 35 So. 3d 873, 877 (Fla. 2010). At its core, the Legislature created a new procedure for assignments of benefits that occurred after July¹, 2019. And statutes setting forth procedures do not impair vested substantive rights. As an initial matter, it is clear from the text of the Act that the Florida Legislature intended for section 627.7152 to be applied to assignment of benefits agreements entered after its enactment. See Hartford Underwriters Ins. Co. v. Union Planters Bank, N.A., 530 U.S.¹, 6 (2000) (explaining that a legislative body “says in a statute what it means and means in a statute what it says there”) (quoting Connecticut Nat’l Bank v. Germain, 503 U.S. 249, 254 (1992); Jefferson v. State, 264 So. 3d 1019, 1024 (Fla. 2d DCA 2018). Getting to this answer is quite easy––the Florida Legislature clearly says that the Act applies “to an assignment agreement executed on or after July¹, 2019.” Fla. Stat. § 627.7152(13). Here, the assignment agreement from Fairway Villas to SFR Services was executed on September⁵, 2019, which is two months after the enactment of the Act. (See Doc. 1-1 at 117.) Thus, the plain and unambiguous language of subsection (13) shows that the Act clearly applies to Fairway Villas’s AOB to SFR Services here. But SFR Services urges the Court to disregard when the AOB was executed but instead focus on when the insurance policy itself was entered between it and Fairway Villas. In other words, SFR Services contends that, although the AOB was executed after July¹, 2019, the insurance policy was issued prior to that date. According to SFR Services, applying the Act to an AOB that assigns rights under an insurance policy that was issued prior to the Act’s passage would alter or impinge substantive rights. SFR Services relies on Menendez v. Progressive Express Insurance Co., 35 So. 3d 873 (Fla. 2010). Menendez involved the Florida Legislature’s inclusion of pre-suit requirements to recover personal injury protection (“PIP”) benefits under an automobile insurance policy. Id. at 874. The Supreme Court of Florida noted that, under the general rule, “the statute in effect at the time an insurance contract is executed governs substantive issues arising in connection with that contract.” Id. at 876. In that case, the insurance policy had been issued before the statute in question was enacted. Nevertheless, the Supreme Court of Florida determined that, contrary to the above-stated general rule, the Legislature did in fact intend to apply the new statute to insurance policies that were already in effect when the statute was passed. The court therefore was faced with the question of whether it should adhere to the legislative intent, or instead hold to the general rule that a new statute does not apply to previously executed insurance policies. Ultimately,

the court found that applying the statute retroactively to those seeking PIP benefits under previously executed insurance policies would impinge those persons’ substantive rights that were created prior to the Florida Legislature’s enactment of the new statute; and, therefore, the new statute could not be retroactively applied. Id. at 877.3 SFR Services’s reliance on Menendez is misplaced. In Menendez, the substantive rights that were affected by the new statute were rights under the insurance policy and vested in the parties when they entered the insurance

of section 627.7152, as created by HB 7065, 2019 Regular Session, subsection (10) of that section is effective upon becoming a law [i.e., on May 24, 2020, when Governor DeSantis approved the Act]’”) (citations omitted). which vested upon the insured and insurer’s execution of the insurance policy agreement. In short, subsection 2(a)(4) does not affect whether benefits under a policy can be assigned but only how that assignment can be accomplished––in other words, the procedures that need to be followed.⁵ Thus, applying subsection 2(a)(4) to determine whether the AOB is valid and enforceable does not affect already vested substantive contractual rights of either SFR Services or Fairway Villas, as set forth in the insurance policy. Because the Act was the law “in effect at the time” the AOB was executed, its application to any “substantive issues arising in connection with that contract,” Menendez, 35 So. 3d at 876 (emphasis added)—i.e., in connection with the AOB—does not run afoul of any impermissible retroactivity principle under Florida law. Accordingly, there is no basis for the Court to disregard the plain, textual directive of the Act applying it to assignments of benefits executed after July¹, 2019. See Fla. Stat. § 627.7152(13). SFR Services’s arguments to the contrary are rejected.

B. WHETHER INDIAN HARBOR MAY CHALLENGE THE VALIDITY OF

THE ASSIGNMENT

The Court next considers SFR Services’s argument that the motion to dismiss should be denied because Indian Harbor may not assert the AOB’s lack of

Indian Harbor is correct that a party who sues to enforce a legal obligation must have “standing” to bring suit. “Standing,” in this context, refers to the person or entity who “owns” the cause of action against the defendant. See Progressive Express Ins. Co. v. McGrath Cmty. Chiropractic, 913 So. 2d 1281, 1285 (Fla. 2d DCA 2005). For a provider of repair services such as SFR Services “to bring an action [for property insurance benefits], the insured [here, Fairway Villas] must assign [its] right to such benefits under the policy to the [service provider].” Id.

Accordingly, the AOB here “is not merely a condition precedent to maintain an action on a claim held by the person or entity who filed the lawsuit. Rather, it is the basis of [SFR Services’s] standing to invoke the processes of the court in the first place.” Id. But Indian Harbor’s reliance on Progressive Express Insurance is misplaced. In that case, it was undisputed that the assignment of benefits purportedly giving rise to the assignee’s standing to sue was unexecuted when the assignee filed suit. Id. at 1285. The court therefore held that the assignee did not “own” the cause of action when it filed suit. Id. The court then addressed the question of whether the assignee could maintain the lawsuit by having the assignment executed after the filing of the action. Citing the rule that standing to bring suit is evaluated at the time the lawsuit is filed, the court held the assignee could not cure the defect of the unexecuted assignment by presenting an executed assignment once the proceedings were already underway. Id. 1285-86. The facts here are different. The assignment in Progressive Express

Insurance was unexecuted when the lawsuit was filed and did not come into existence until it was later executed after commencement of the lawsuit. Here, though, the AOB was executed on September⁵, 2019, before this lawsuit was filed. The executed AOB means SFR Services had standing when it initiated the cause of action. See AMC Gerber Chiropractic L.L.C. v. GEICO Gen. Ins., 925 F. 3d 1205, 1211 (11th Cir. 2019) (an assignee “stands in [the assignor’s] shoes”) (citing Houk v. C.I.R., 173 F. 2d 821, 825 (5th Cir. 1949) (“an assignee . . . stands in the same position as its assignor had stood”)); see also Shreve Land Co. v. J & D Fin. Corp., 421 So. 2d 722, 724 (Fla. 3d DCA 1982) (“The law is well settled that an assignee succeeds to his assignor’s rights under the assignment of a contract.”). That Indian Harbor now seeks to declare the executed AOB invalid or unenforceable does not retroactively change the assignee status of SFR Services at the time the lawsuit was filed. It instead presents a different question than the “standing” issue decided in Progressive Express Insurance: whether a defendant may seek to invalidate an executed assignment as a defense to a suit by the assignee to recover the assigned benefits.⁶

Under common law principles applicable to assignments, the following defenses can be asserted by a debtor against an assignee of the debt: “A debtor . . . may generally assert against the assignee all equities or defenses existing or acquired against the assignor prior to the time that the debtor received notice of the assignment.” 6A C.J.S. Assignments § 133. In other words, Indian Harbor may assert as a defense against SFR Services’s suit under the insurance policy only those defenses that it could have raised if the suit had been brought by Fairway Villas. With regard to defenses based on the assignment itself, the applicable common law rule is: [T]he debtor may assert as a defense any matter which renders the assignment absolutely invalid or ineffective, or void, such as, the nonassignability of the right

L.L.C. v. 12840-12976 Farmington Rd. Holdings, L.L.C., 717 F. Supp. 2d 724, 735 (E.D. Mich. May 13, 2010) (the assignment’s validity “does not effect [sic] whether [the defendant] owes its obligations, but only to whom [the defendant] is obligated.”) (emphasis in original), aff’d, 399 F. App’x 97 (6th Cir. 2010); 29 Williston on Contracts § 74:50 (4th Ed.) (“[T]he debtor has no legal defense [based on invalidity of the assignment] . . . for it cannot be assumed that the assignee is desirous of avoiding the assignment.”). Absent a challenge to the validity of an assignment that, if successful, would result in a finding that the assignment was void ab initio, the case law generally holds that the defendant cannot raise a validity argument. See Progressive Express Ins. Co., 913 So. 2d at 1289 (Davis, J. specially concurring) (stating that a third party to the assignment agreement between assignor and the assignee “is not entitled to make” the argument that the assignment is invalid).⁷ The only argument Indian Harbor makes that might suggest a noncomplying AOB is void as opposed to merely voidable is its argument based on the language of subsection (2)(d), which provides that assignments of benefits that do not comply with the Act are “invalid and unenforceable,” Fla. Stat. § 627.7152(2)(d). (See Doc.

But in any event, Indian Harbor has provided no authority for its assertion that the Act should be viewed solely from the perspective of the insurer’s interests. It is quite possible the Florida Legislature, in regulating post-loss assignees of benefits under an insurance policy, had the interests of both insureds and insurers in mind (as Indian Harbor itself argues in its brief (Doc. 6 at 4)).⁹ Therefore, it is not illogical to conclude that subsection 2(a)(4) was intended to provide a basis for policyholders to challenge AOBs, not to provide a basis for insurance companies to avoid suits brought pursuant to AOBs.10

Harbor may be correct that the Florida Legislature intended that insurers could raise the validity issue in suits brought by assignees of insureds, the Court is not prepared at this time to rule in favor of Indian Harbor on that public policy question when there is “over a century” of case law “from state and federal courts around the country” that holds “a litigant who is not a party to an assignment lacks standing to challenge that assignment.” Livonia Prop. Holdings, 717 F. Supp. 2d at 736-37 (citing cases). Should Indian Harbor wish to present argument or evidence on this issue at some later point in these proceedings (such as in a motion for summary judgment), it is certainly free to do so. At present, the record is insufficient for this Court to resolve the legal question raised by Indian Harbor’s argument, and so the Court cannot grant the motion to dismiss on this basis.

only portion of subsection² expressly noting an insurance company’s “rights” is the requirement that the assignee provide the insurance company a copy of the assignment within a certain time frame and in a certain manner. See id. § 627.7152(2)(a)(3). 11 Indian Harbor cites a state trial court case that ruled in favor of an insurance company’s challenge to an assignment of benefits for failing to comply with the written estimate requirement of subsection 2(a)(4). See Apex Roofing & Restoration, LLC v. Sec. First Ins. Co., 2020 WL 4726815 (Fla. Cir. Ct. Aug. 11, 2020). But based on its citation without discussion of Progressive Express Insurance, the decision assumed the AOB was automatically void from its inception due to noncompliance with subsection 2(a)(4), without any discussion or analysis of the legal principles in this order. C. WHETHER THE AOB COMPLIES WITH SUBSECTION (2)(a)(4) In addition to the above, SFR Services argues that the AOB in any event satisfies the requirements of subsection 2(a)(4). SFR Services attaches to its response to Indian Harbor’s motion to dismiss a copy of an email, which it represents was sent to a claims representative for Indian Harbor on September⁵, 2019. The email attached the following documentation: a. Executed Assignment of Insurance Benefits; b. Signed W⁹ for SFR Services; c. Brochure from the Florida Department of Financial Services regarding AOB contracts); d. Insurer’s duties under Section 627.7013(5)(a), Fla. Stat.; e. Written, itemized, per-unit cost estimate of the services to be performed; and f. Photos of the damage. (Doc. 13 at 4.) SFR Services also attaches to its response a copy of item e, the “written, itemized, per-unit cost estimate of the services to be performed. It explains that the estimate was prepared using the Xactimate platform, which is the industry standard in estimating insurance claims throughout the country. (Id.) The estimate is about nine pages long and include sketches of the applicable buildings. (Doc. 13-2.) SFR Services asserts it “is nonsense” to interpret the Act to require the actual AOB itself include within its pages the detailed line-item estimate that is generated by the Xactimate estimating platform. (Doc. 13 at 6.) According to SFR Services, “by submitting its AOB to Indian Harbor simultaneously with its “written, itemized, per-unit cost estimate of the services to be performed,” it has complied “with the intent of and the plain language of” subsection 2(a)(4). (Id.) In response, Indian Harbor argues that the Court should not consider the attachments to SFR Services’s response brief because they are outside the four corners of the Complaint. (Doc. 20 at 5.) Indian Harbor itself argues, however, that the alleged invalidity of the AOB is an affirmative defense. See Doc. 6 at 3 (stating that “a complaint may be dismissed under Rule 12(b)(6) when its own allegations indicate the existence of an affirmative defense, so long as it clearly appears on the face of the complaint.” (quoting inter alia Quiller v. Barclays Am./Credit, 727 F. 2d

1067, 1069 (11th Cir. 1984))). SFR Services was not required to anticipate and negate Indian Harbor’s affirmative defense in its Complaint. See Sec’y of Lab. v. Labbe, 319 F. App’x 761, 764 (11th Cir. 2008) (citing La Grasta v. First Union Sec., Inc., 358 F. 3d 840, 845 (11th Cir. 2004)). SFR Services refers to documents outside the Complaint only to rebut Indian Harbor’s affirmative defense. The Court can take judicial notice of the existence of these documents¹² for purposes of deciding the legal question of whether those documents raise a possible basis for refuting

Indian Harbor’s assertion that the AOB is invalid.13

Under the contemporaneous instrument rule,” “two or more documents executed by the same parties, at or near the same time, concerning the same transaction or subject matter are generally construed together as a single contract.” Wilson v. Terwillinger, 140 So. 3d 1122, 1124 (Fla. 5th DCA 2014). Indian Harbor points out SFR Services has shown only that the Xactimate estimate was provided to Indian Harbor at the same time as the AOB was executed; it has not shown whether it was provided to Fairway Villas at the same time. (Doc. 20 at 6.) But again, SFR Services is not required to anticipate Indian Harbor’s affirmative defense in the Complaint. The question is whether Indian Harbor has shown that the affirmative defense of invalidity is apparent on the face of the AOB itself. If the statute is construed to allow consideration of a simultaneously executed document

Civ. P. 15(a) (amendments to pleadings are to be freely given). It would be a pointless exercise to dismiss now only to be faced with the very same issue on a motion to dismiss an amended complaint with the documents in question attached. not contained “within” the AOB itself, then the AOB by itself does not irrefutably establish the existence of the affirmative defense. The question then is whether it is plausible that the statute permits consideration of a separate document from the AOB itself but provided simultaneous with the AOB such that it can be considered part of that contract. On the one hand, the language of the statute does suggest that the written estimate be actually included within the four corners of the AOB itself. On the other hand, it would seem odd to require the Xactimate estimate be reproduced as part of the legal document of assignment. Since the parties’ briefing provides only a superficial discussion of this issue of statutory interpretation, the Court declines to rule on it at this time.

D. WHETHER THE COMPLAINT IS SUBJECT TO DISMISSAL WITH

PREJUDICE IF THE AOB DOES NOT COMPLY WITH SUBSECTION

2(a)(4)

Finally, SFR Services argues that, if the Court concludes (1) the Act applies, (2) Indian Harbor can challenge the validity of the AOB, and (3) the AOB violates subsection 2(a)(4), then the remedy is to substitute either a conforming AOB or else Fairway Villas as the plaintiff. (Doc. 13 at 7.) Indian Harbor argues, based on Progressive Express Insurance, that no form of substitution would be valid, because SFR Services lacked standing from the inception of the case. (Doc. 6 at 5.) Indian Harbor’s argument presumes that a nonconforming AOB would be void ab initio. In other words, its argument treats the question of SFR Services’s “standing” as if it implicates Article III jurisdictional standing. But the issue of whether the AOB is valid is a merits question of contractual standing, not Article III standing. See, e.g., Perry v. Thomas, 482 U.S. 483, 492 (1987) (holding that the question of whether the elements of a breach of contract claim are satisfied—

including the question of whether the contract exists—goes to the merits, not to a court’s power to resolve the controversy); see also SM Kids, LLC v. Google LLC, 963 F. 3d 206, 212 (2d Cir. 2020) (stating that a litigant’s “threshold” argument that an assignment is not valid does not call into question the “justiciability of the dispute” but rather raises the issue of whether the plaintiff states a claim for relief).¹⁴ Given that the “standing” issue raised by Indian Harbor here is not an Article

III jurisdictional issue, declaring the AOB invalid and unenforceable would suggest that the cause of action against Indian Harbor would in fact belong to Fairway Villas, and that Fairway Villas could thereafter be substituted under Federal Rule of Civil Procedure 17(a)(3).15 But the Court need not resolve this issue at this time. If the AOB is declared unenforceable and invalid at some point later in these proceedings, the parties can address the proper remedy with briefing that discusses

CONCLUSION

For the foregoing reasons, Indian Harbor’s Motion to Dismiss (Doc. 6) is

DENIED.

ORDERED in Fort Myers, Florida this 26th day of March 2021.

Sp

JOHN L. BADALAMENTI

UNITED STATES DISTRICT JUDGE