You come home from work one day to find that a leak under your sink has sprayed water all over the floor. Panicking, you shut off the water main and call the first plumber that pops up on Angie’s List. He fixes the leak and recommends a company to take care of all the water damage.
You’re satisfied with their work, so you take the referral and call the remediation company. But when they show up, that’s when the problem starts.
They present you with an Assignment of Benefits form and say that they won’t start work until you sign it.
What Is An Assignment of Benefits Agreement?
An Assignment of Benefits (AOB) is an agreement that effectively allows a third party to deal directly with your insurance carrier on your behalf.
This means they can file insurance claims, make repair decisions, and even collect money without you having to lift a finger. On the surface, this just sounds like great customer service. You get to hand over the hassle of dealing with your insurance company and still get your house fixed.
What could possibly go wrong?
Here’s How It All Goes Wrong…
If all contractors were honest, there might not be anything wrong with signing an AOB form and letting the pros do all the heavy lifting, so to speak.
But—and this might surprise you—not all people are honest.
Shocking, I know.
Contractors don’t use Assignment of Benefits agreements to make your life easier, but to make their lives easier (and get more money).
hen you sign an AOB form, you are handing your contractor the keys to your insurance policy (without any backup copies for yourself).
What does this mean? It means you can’t collect any payments from the insurance company. You can’t even talk to them about the claim.
You have signed your rights as the insured entirely over to the contractor.
Why Should You Care?
Their usual tactic is to submit an invoice to your insurance company with a grossly inflated price, well above the adjuster’s estimate and/or the price their competitors are charging.
So the contractor is getting a few extra dollars for a hard day’s work. You don’t have to pay them…why should you care?
But Assignment of Benefit agreements do affect you individually, as well as the insurance industry as a whole.
For starters, your insurance company doesn’t usually reimburse that inflated price without a fight. In most cases, they’ll challenge the amount and the two of them will go back and forth until they reach an agreement. (Remember, since you signed away your rights, you won’t have a say at all.)
If the contractor hasn’t completed the work yet, your home might sit in disrepair until they settle. If the work has been done, the contractor can file a lien on your home until you pay.
Unfortunately, it’s even worse—for everyone—when the insurance company agrees to pay that ridiculous price. We’ve talked about the dangers of insurance fraud before. Well, this is just another example of that.
When the insurance companies are forced to pay out more than they expected (and more than they should), they need to take in more money to continue paying claims and stay in business. So how do they make up for these losses?
By raising premiums.
AOBs are not a victimless crime. When the insurance industry is put through the ringer, Florida consumers pay the price.
Is This Legal?
AOB forms wreaked havoc on Florida homeowners for a long time because they were completely legal. However, in December 2022, Florida Senate Bill 2-A prohibited AOB forms.
This means that you are unable to sign an AOB on policies issued after January 1, 2023. We may still see some unscrupulous contractors trying to slip under the radar, so be on your guard!
What Should You Do?
As a savvy homeowner, what can you do?
First, when you have a claim, call your insurance company or independent agent FIRST. They can help you find a reputable, high-quality contractor that hasn’t cost them an arm and a leg.
Second, beware of referrals to water damage or other remediation companies. The contractor referring you may only be recommending them because they get compensation for doing so. You want your home repair professionals to be recommended based on how good they are, nothing else.
Last, but certainly not least, DO NOT SIGN AN ASSIGNMENT OF BENEFITS AGREEMENT. Not only are they against the law, there is no legitimate reason why a contractor would need you to give up your rights under your insurance policy to get your home back in livable condition.
However, some of you reading this might already have signed an AOB form. What do you do now?
Luckily, you are permitted under Florida law to revoke the contract
- within 14 days of signing it;
- within 30 days if the AOB doesn’t include a commencement date and “substantial work” hasn’t yet been done;
- if the contractor has not “substantially performed” the work within 30 days of the commencement date.
If you can rescind the Assignment of Benefits agreement, do so as soon as possible.
Stay In Control
You are the homeowner and the policy holder; DON’T let a contractor take your rights away from you!
When you report a claim, ask your insurance company or agent for the name of a reputable contractor and NEVER sign an Assignment of Benefits form. The hassle you will deal with later is not worth the minor convenience of not dealing with the insurance company yourself.
If you have already signed an AOB form, review the terms for rescission and follow them, if possible. Under Florida law, it is illegal for a contractor to charge you a penalty or fee for cancelling your AOB.
As always, if you have additional questions about Assignment of Benefits forms, contact Florida’s Chief Financial Officer or call one of the friendly agents at Harry Levine Insurance.
With two convenient offices to serve all of Central Florida, our main focus is on building a network of coverage that fits your needs and your budget. Get a free quote today to protect your home, auto, or business!
Jennifer GonzalezSeptember 2, 2017
We are currently living in our own custom designed by us, my husband and I have also been able to purchase the entire acre lot the custom designed home by us and we were here for the entire time of the building of the home as we were living just 5 miles away from the home as it was under construction by a very small but very well known Alvarez Building Company of Tampa Florida! We had this house built of solid wood no particle wood anywhere as well it’s a real Brick home not Brick on concrete as well as a 4 foundation for the interior of the full almost 8,000 square feet of this home with building standards set in place after Hurricane Andrew hit Miami with Spanish Barrel Tile Roofing and its a two story, 4 Bedroom 5 Bathroom home with a 3 car garage with an upgraded interior floor with a lifetime guaranteed by the company that we paid to install it after the painted concrete flooring was continued to need repainted! We have lived here as the original custom designed home since we moved into our home in April of 1993, this house took a full year with out any delay to be built with our own personal daily inspections as we watched it being built for that amount of time it’s also in wonderful condition with tile floors on the downstairs and real wood floors in our office and full size family room with 2 carpeted guest bedrooms also and our upstairs master bedroom of over 2,000 square feet with separate full custom designed walk in closets for us and a double head glass cube shower and a full double whirlpool porcelain on a Kohler tub and a separate bathroom with a full sized toilet and bidet. Also another full bedroom with full bathroom upstairs and we are using it as a full time gym equipped with professional gym equipment! Our we have 2 different chimneys we have a fireplace in our master bedroom and we have a fireplace in our family room which are both wood burning!! We have had it completely paid off for years now and we might be considering the need for a new roof as we started to only have our gutters cleaned and now of course they are telling us that they are seeing signs of rain damage to our roof and we have not seen any signs at all and our roof is made of the same Spanish Barrel Tile that has lasted for centuries and I am truly aware of roofer scams!! We are looking for some kind of service to give us an honest opinion about the exact truth of roofing situation!!
Jason LevineSeptember 5, 2017
Thank you so much for contacting us! It sounds like you have a beautiful home that you put a lot of care into designing. I’m not entirely sure what your question is. Would you be so kind as to restate it?
I can offer that tile roofs have been actuarially shown to have a realistic expected life span of 30 years. That doesn’t mean that a tile roof cannot last longer, or that some tile roofs won’t have shorter useful lives. You responded to our installment on Assignment of Benefit contacts, so allow me to offer the following as well:
If you do have roof damage and your contractor starts asking a lot of questions about your Homeowner Insurance you should be very skeptical. Maybe even given a second opinion or a new contractor altogether. The most important thing is to fully read the contractor that any roofer or other contractor offers to you to sign. DO NOT EVER sign a contract with an “Assignment of Benefits” clause. Such a clause takes control of the claim and you insurance policy in regards to the claim altogether away from you. It opens the door for lawsuits, liens against your home and outrageous dishonest price inflation.