Typically I like to use our newsletters to discuss business related items, such as ways to increase sales, or new customer service initiatives that help increase customer retention. However, with the recent uptick in a new kind of mitigation contract that is negatively affecting our industry I thought it would be beneficial to discuss Assignment of Benefits (AOB). Let me start out by asking a question: would you ever sign a blank check and hand it to a stranger? Or would you ever sign a blank contract and allow someone to fill it in as they please? The answer to both is of course not; you would never fully agree to something and sign your name to a legally binding contract without first knowing what the contract was. Sadly, this is the reality with AOB- most homeowners have absolutely no idea what the contract means. And disreputable mitigation companies get them to sign the contract by exploiting the fact that emergency property damage has occurred and the homeowner is typically in distress.

Currently, there is a bill being considered by the Florida House of Representatives, titled HB 909- Property Insurance, that addresses the exploitation of “Assignment of Benefits.” Assignment of Benefits originated in medical billing, wandered into Personal Injury Protection and is now intimidating far too many unknowing homeowner’s into “assigning” away their rights to negotiate and adjust a loss. To put it plainly, AOB allows contractors, loss remediation entities, emergency water extraction companies and the like, to take control of the homeowner’s claim, allowing the contractor or water extractor to collect the claim settlement funds directly from the insurance company, without any input negotiation from the homeowner. Meaning, the homeowner has absolutely NO input in their claim! That is, only IF the homeowner signs the appropriate forms and consents to the work in the first place.

So what exactly can signing an AOB eventually result in, other than the homeowner losing control of the claims process and giving the water extraction company the power to collect and negotiate? Signing documents with an Assignment of Benefits agreement could also require the homeowner to pay amounts beyond what is covered in the policy. In addition, the contractor could place a lien on the home, and contractor liens in Florida can be enforced by foreclosure.

But the bigger picture is how AOB and other insurance fraud is causing insurance costs in general to rise and premiums to go through the roof. Many of the water remediation companies that require AOB end up suing the insurer (insurance carrier) to force payment of ridiculously inflated bills; ie., charging $20,000 for extraction, when a comparable estimate for a 1500 sq. ft. house runs about $3,500. When this happens, insurance companies are forced to pay extraordinary attorney fees and court costs to defend themselves in court, and they offset those costs by raising premiums for their insured. The more AOB and insurance fraud there is, the more we all pay!

Take Aways

As a Homeowner:
– Do not choose a contractor, loss remediation entity, or emergency water extraction company that forces you to sign an Assignment of Benefits.
– DO NOT sign any contract documents or forms with any language you do not fully understand.
– When in doubt, call your insurance agent or carrier for an explanation and advice.

As an Insurance Agent:
– Make sure that any vendor you are partnered with does not require an Assignment of Benefits as part of their work contract.
– Be sure to explain the danger of Assignment of Benefits to your insured.
– Encourage your insured to contact you for approved vendors, and with any questions regarding contracts, etc.

Joe Taylor Restoration does not use Assignment of Benefits- it is not part of the contract we sign with the property owner. As a preferred vendor for over 30 insurance carriers in Florida, we are not part of the problem, causing insurance costs to rise because of fraudulent activity; we are part of the solution.

–  Written by Aaron Getty