When a hurricane comes through Florida it’s like a burst pipe in a home. It’s a major event everyone pays attention to that can leave a lot of damage – fast and furious. But there’s something else going on in Florida and it’s more like a small leak behind your walls. It’s causing major damage over time, but most homeowners don’t even know about it. Much like a leak this problem has gone undetected until one day you start to smell something funny. I’m talking about a legal arrangement called “Assignment of Benefits” and - it’s getting real stinky!
When a contractor has a homeowner sign a contract with the term “Assignment of Benefit” (words to the effect of 'I transfer and assign any and all insurance rights, benefits, and causes of action under my property insurance policy' to the contractor) they are signing the rights to their claim under their homeowner’s policy and any monies for the damage to that contractor in exchange for the contractor fixing the problem. Many homeowners don’t understand what they are giving up when they sign a contract like this.
The real problem is that a large percentage of contractors who use this type of contract, charge an amount inconsistent with the amount of work performed, sometimes far in excess of the insurance adjuster’s estimate or the industry standard. If the insurance company challenges the expenses submitted, the policyholder is caught between a rock and a hard place. You no longer have the right to try to resolve the issue with the company. You have signed that right away.
Unfortunately, it’s the homeowner who is caught in the middle and pays the price. If the insurance company fights the inaccurate charges the contractor could decide not to finish the work or even put a lien on the house, if the insurance company decides to back down and just pay the higher price this contributes to premiums rising for all customers. In the last 10 years AOB lawsuits have increased by almost 1000%!
This problem started with water damage claims and has grown into other areas like roofing. We’re seeing a huge epidemic of contractors going door-to-door promising homeowners “free” roofs. They target older homes that are starting to near the end of their useful life so they can convince the homeowner that the normal wear and tear is hail damage. At which point they convince the homeowner to file a claim and assign them the claim rights. In some instances the contractor doesn’t use an AOB, but coaches the homeowner on what to say and do to try and game the system with a fraudulent claim.
The damage AOB is causing is reaching crisis level proportions. But, we ARE fighting back. The insurance industry is working to pass HB 669 and SB 1064 which will reform the use of assignment of benefits (AOB) and help stop this litigation for profit scheme. In the meantime, knowledge is power. Let everyone you know about this issue and the negative consequences of singing an AOB contract!
By American Integrity Insurance Company