In assignment of benefits, homeowners sign over their insurance claims to contractors, who then seek payment from insurance companies — often spurring lawsuits about claims and payments.

Contractors in the past have been able to recover their attorney fees from insurers if they are successful in the lawsuits, a concept known as "prevailing party fees." But the new law stripped contractors of being able to recover prevailing-party fees when they are assigned benefits.

Homeowners can still recover prevailing-party fees if they file lawsuits directly against insurers, but the contractors cannot. The lawsuit alleges that the change violates equal-protection and due-process rights and denies contractors access to courts.

"Claims submitted to insurers for work performed by contractors under an AOB (assignment of benefit) are generally not large in monetary amount," the lawsuit said. "When the insurer delays, underpays or does not pay a claim at all, contractors are forced to commence an action against the insurer to recover the full amount due for the work performed. Without the corresponding right to recover prevailing party fees, SB 2-D makes it economically unfeasible for the contractor to pursue its lawful rights and remedies in court. Invoices for work performed by contractors under AOBs are generally not significant enough for a lawyer to agree to represent the contractor on a contingency fee basis and it is not economically reasonable for the contractor to … pay a lawyer on an hourly basis to recover the amount(s) owed."

The lawsuit said invoices for work done by Air Quality Assessors and many other members of the association often total $2,500 to $3,000.

"The inability to recover prevailing party attorneys' fees will effectively shut the courthouse door to plaintiffs because it will be cost-prohibitive to pay an attorney for these types of small claims," the lawsuit said.

But William Large, president of the Florida Justice Reform Institute, a business-backed group that lobbies to reduce litigation, said in a statement after the law passed that "property insurance lawsuits have exploded over the last several years, overwhelming Florida's insurance market."

"Senate Bill 2-D contains significant litigation reforms and gets to the heart of escalating rates and limited coverage — lawsuit abuse," Large said.

Assignment of benefits has long been a contentious issue in the insurance industry. The Legislature in 2019 put additional restrictions on assignment of benefits, at least in part because of an increase in residential water-damage claims.

But contractors contend that assignment of benefits helps homeowners who are unfamiliar with making sure insurance claims are handled properly.

"AOBs are not new and have been used for a long time, especially during emergency weather situations," the lawsuit said. "In Florida, AOBs are prevalent in the residential property context when homeowners suffer damage to their home and need to hire contractors to repair the issues."

The lawsuit, which includes seeking a preliminary injunction against the law, names as defendants Melanie Griffin, secretary of the state Department of Business and Professional Regulation, and Donald Shaw, executive director of the Construction Industry Licensing Board. The case has been assigned to Leon County Circuit Judge Layne Smith, according to an online docket.

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