Assignment of Benefits & Potential Dangers to Homeowners

The current 'hot' controversy in Florida property insurance is Assignment of Benefits, or AOB. This is a legal provision that allows a policyholder to give permission for a contractor to collect a claim payment directly from the insurer. AOB laws have been around in Florida for almost 100 years, but recently, AOB fraud and AOB lawsuits have gotten more common, and thus, the subject has also received more media exposure. Here's how things can go wrong:

You have water damage to your home, so you call a water restoration company. The company asks you to sign forms, including an AOB document that assigns your rights over to the contractor. In the meantime, the claim is filed with your insurance company. If the damage is covered under your policy, and if the contractor does a professional job at a reasonable price, there may be no problems. If, however, the damage is not covered by the policy, or if the contractor's bill exceeds what the insurance company will pay, it creates an outstanding bill. The contractor can then sue the insurance company, and you. The contractor could place a lien on your home and, in Florida, contractor liens can be enforced by foreclosure.

Consider another scenario, the same situation as above. This time, you sign the AOB, the contractor collects the claim payment, and then never finishes the job. Calls go unanswered, and your home is still damaged. 

Even worse are unscrupulous contractors who solicit homeowners for fraudulent claims. These contractors may target neighborhoods with high-value homes and aging roofs. They will knock on doors, and tell homeowners that they can see roof damage from the ground, and that if they can go up on the roof, they may find a reason for the insurance company to pay for a new roof. Usually, there is no legitimate damage, and the contractor uses techniques to simulate real wind or hail damage to the roof, so that the policy will pay. Sometimes the adjuster can identify intentional damage, sometimes not. In these situations, the contractor may still disappear after receiving the payout - without completing the job.

There are several ways to protect yourself. Unless a situation is urgent, please always contact your agent to discuss loss or damage to your home. Most insurance companies use preferred contractor networks, especially for water losses, meaning that you are protected from unknown or unreliable companies. They usually respond faster, and the claims process is usually smoother, from start-to-finish. 

If you do elect to hire your own contractor, refrain from signing anything that you do not fully understand, especially anything containing an Assignment of Benefits provision. Also, please verify that the contractor's license is valid, that he is properly insured, and that there are no complaints against him. Before work begins, insist on a written contract that details the work to be performed, the timeline, and the payment schedule. Make sure the contractor pulls the required permits and posts them on your property. You should receive a Partial Lien Release document for every payment that you make, and a Final Release of Lien after the job is paid for and the work has passed final inspection. Keep all receipts and documents.

Please let us know if you have any questions.