Despite the efforts of insurance companies to change current law, the Florida Legislature has failed to enact proposals affecting so-called “assignment of benefits.” Using an AOB, a homeowner with property damage can assign insurance benefits to a contractor or repair service, which then makes the necessary repairs and enforces the claim against the insurance company.
Insurance companies claim that their costs are higher when third-party contractors become involved in the claims process. They claim that contractors inflate claims beyond the true cost of repairs and that insurance costs and premiums go up when third parties and their lawyers gain control of homeowners’ policy rights.
Insurers warn that there can be situations in which a contractor performs work at an inflated cost, the insurer refuses to pay for all of it, and the homeowner ends up potentially be responsible for a balance due.
In many cases, a repair service or contractor may require either a substantial cash deposit or an assignment of benefits before beginning work. In an emergency, such as severe water damage, an AOB enables the homeowner to get water mitigation performed quickly, with the responsibility for collecting on the insurance left to contractor. The contractor may have more experience dealing with property and casualty insurers than the homeowner, a potential benefit for the homeowner. Ideally, a homeowner’s AOB to a contractor would be like a visit to the doctor, in which the doctor’s practice takes on the task of collecting payment from an insurer.
Because insurance companies feel besieged by AOB claims, it seems likely that they will continue to battle for change. Insurers frequently challenge assignments of their benefits to third parties in court, despite losing a number of cases. It is also likely that they will continue to seek legislation to limit AOB claims, add notice requirements, and generally make it more difficult for homeowners to turn over their claims to third parties.
If you have a property insurance claim, it is advisable to consult with an expert in property and casualty insurance law to ensure that your assignment of benefits will not be vulnerable to a legal challenge.