Michael Citron, left, and Igor Hernandez, right, of MAC Legal in Hollywood, Florida. Courtesy photos. Michael Citron, left, and Igor Hernandez, right, of MAC Legal in Hollywood, Florida. Courtesy photos.

A controversial new Florida insurance law has found its first challenger as a contractor's claims against its insurer survived a motion to dismiss Thursday in a case that presents issues likely to reach the state Supreme Court.

The lawsuit involves assignment-of-benefit agreements, or AOBs, which allow homeowners to sign over their insurance policy rights to contractors.

But the new law, Florida Statute 627.7152, passed in May 2019, blocks third parties from collecting attorney fees. It also allows insurers to offer policies that restrict or block AOBs.

Supporters say the law will curb abusive litigation, speed up repairs and save consumers the hassle of chasing claims. But critics argue it will tip the scale against policyholders.

Michael Citron and Igor Hernandez of MAC Legal in Hollywood are among those critics. They represent plaintiff KDH Architecture Inc., which sued in November 2019, claiming United Property & Casualty Insurance Co. wrongly denied coverage for $916,000 in repairs after Hurricane Irma damaged the Sun Vista Gardens Condominium Association Inc. in Tamarac.

The condominium signed over benefits to the contractor in August 2018. But defense attorney Otto Espino of Kelley Kronenberg in Miami argued the suit should be dismissed because the plaintiff allegedly failed to fulfill its pre-suit obligations. He also claimed it couldn't seek attorney fees now the new law has been enacted.

"They are not coming to United and asking for benefits for services already rendered, for tasks that have been completed, for consumables that have been consumed. They're basically saying they want $916,000 dollars prospectively for all the repairs they think they believe the property's going to need for damages that they contend are related to Hurricane Irma," Espino said. "They do stand in the shoes of the insured, and they do have those obligations to come and sit down and provide an examination under oath."

But Broward Circuit Judge Keathan Frink disagreed via Zoom, denying the defendant's motion to dismiss the case and to strike claims for attorney fees. However, the judge did note the defendant's allegations about compliance with contractual obligations could be fodder for a future summary judgment.

Kelley Kronenberg attorney Esperanza Briscoe-Diaz is handling the defendant's case and did not immediately respond to a request for comment.

The judge declined to weigh in on constitutionality, finding the statute doesn't apply because it was enacted after the benefits were assigned.

Meanwhile, plaintiff counsel Citron and Hernandez seek to certify that issue as a question of great public importance, alleging the new law violates the Florida Constitution's equal-protection clauses. They contend the law provides different rights to the insured and to the assignee, even though they're part of the same contract.

"Now, as an assignee, you're basically a second-class citizen," Hernandez said before the hearing.

The plaintiff's team is confident the question will reach the Florida Supreme Court, whether this case follows it there or not.

They point to a high court ruling from 2000, which found a similar fee-shifting statute for Personal Injury Protection, or PIP, cases violated the Florida Constitution by curbing medical providers' ability to seek attorney fees.

The defendant has 20 days to respond to the ruling.

Read more:

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