Assignment of Benefits: Abuse or Benefit?
There is some confusion as to what is assignment of benefits or AOB. Assignment of benefits is a legal tool that allows a third party to be paid for services performed for an insured or policyholder (property or automobile owner) who would normally be reimbursed directly by the insurance company for a covered loss. In simple terms, the assignment of benefits is a document signed by the policyholder allowing the company contracted to do the repairs, such as a water extraction company, a roofer, a plumber, or a windshield replacement company, to “stand in the shoes” of the insured and seek direct payment from the insurance company. This is commonly used when a homeowner experiences a water loss from a leaky pipe, sink, fridge or dishwasher, or if the windshield in a car needs to be replaced.
Assignment of benefits have been a part of Florida’s marketplace for the past 100 years per the Florida Office of Insurance Regulation. And I believe in many instances for good reasons. Sometimes a homeowner doesn’t have the necessary funds to pay for emergency water extraction services, mitigation repairs or repairing or replacing property damage due to a loss such as a burst pipe, wind damage, or tree falling on your home. The assignment of benefits allows a company to perform these services in a timely manner lessening the amount of damages and reducing the overall cost of the claim. If done appropriately, the assignment of benefits may very well save the insurance company money. Only recently some argue (mostly the insurance industry and its lobbyists) that this legal arrangement allows unscrupulous contractors to over inflate or submit improper claims, causing legal battles between the contractor and the insurance company, with the consumer left out of the picture.
Are there abuses, yes. But I also think some of these concerns are greatly exaggerated. I agree with Florida House Representative, Sean Shaw, that the insurance industry likes to tell the Florida Legislature that payment due on insurance claims is a “crisis.” We all recall the “hurricane crisis” a decade ago. In 2010, when Florida didn’t have a direct hit from a hurricane in five years, the insurance industry had a “sinkhole crisis.” Once the insurance industry had the legislature approve the eradication of meaningful sinkhole coverage in 2011 (SB 408) we are now faced with a “burst pipe/water loss crisis.” I am sure next year we will have a “windshield” or some other crisis.
The notion that insurance companies are victimized by windshield replacement companies, plumbers and water remediation companies is nonsense. Having represented policyholders for the past 10 years, I can’t remember any instance where the insurance company offered to overpay a claim, nor saw an insurance company cover an unlawful or fraudulent claim. A claim is not over-inflated or fraudulent simply because policyholders disagree with a coverage decision or the payment amount for repairs. Policyholders in Florida have a contractual and constitutional right to disagree with their insurance company. All policyholders should get their own repair estimate because in many instances claims are underpaid as the insurance companies know many policyholders will not obtain their own estimates or dispute the insurance company’s claim decision.
The insurance companies have the resources to fight any and all claims. I have never been retained because the insurance company adjusted a claim in a timely and fair manner. My clients’ cases always start with “no, we will not . . . “. The assignment of benefits doesn’t alleviate the policy holder or its assignee’s duties to comply with the insurance policy’s post loss obligations, which generally include: timely notice of the loss, the insurance company’s right to inspect the loss prior to repairs, and exchange of information and documents as to the cause and amount of the loss, recorded statements, providing sworn proof of loss or attending an examination under oath.
In my opinion, what the insurance industry is trying to accomplish with these announcements of insurance “crises” at every legislative session in Tallahassee is to ultimately convince the legislature to abolish the fee statute (627.428, Fla. Stat.). This statute provides recovery of reasonable attorneys’ fees and costs for policyholders when their claims are denied or underpaid. I would sincerely urge Floridians not to allow the insurance industry to take away the fee statute. The purpose of the fee statute is to level the playing field and discourage insurance companies from fighting valid claims. Without this consumer protection, most if not all policyholders would be without resources to fight a denied or underpaid claim.
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