storm damage

Assignment of Benefits Reform: Why Homeowners Are in Trouble

RRBHLAWZEN Homeowners' Insurance, Insurance Litigation, Property Insurance

The new assignment of benefits, or AOB, reform could seriously restrict homeowners, their options, and, more importantly, their out-of-pocket costs for property repairs.

Hurricane season in Florida. It’s the only thing anyone thinks of when they think of disasters that can occur in The Sunshine State. Many of our friends up north assume our homeowner’s insurance policies are through the roof due to the chance of our homes being picked up and taken away like The Wizard of Oz.

For some they are, though not for reasons as severe as the iconic movie depicts.

It is true. Hurricanes do decimate many of our beloved cities and cause levels of preparedness not seen in other parts of the country. But there are additional methods of property destruction that frequently occur as well.

  • Cast iron pipe corrosion causing pipe bursts
  • King tides flooding our properties
  • Wind damage to windows, roofs, and pool enclosures

In recent years, we have all seen the onslaught of contractors banging on doors and ringing phones to try to win the repair jobs. And while there’s nothing wrong with contractors getting work done—and getting it done quickly—insurance companies are not happy.

What is an assignment of benefit, or AOB?

An AOB is an agreement between a homeowner and a third-party contractor. The agreement gives the third party the right to act and negotiate on behalf of the homeowner.

After a hurricane, we see roofers out and about.

When a flood occurs, mold specialists appear to be everywhere.

These are examples of companies who are out to perform work within the assignment of benefit realm. They speak with homeowners, agree to make repairs at no or low cost, and will completely eliminate the headache of dealing with the insurance company.

How? By signing an assignment of benefits agreement, giving them authority to work directly with the homeowner’s insurance company.

The company then, in turn, bills the insurance company for rates much higher than the insurance company would have offered in the first place. For this reason, insurance companies have been fighting this agreement for years.

As of last July, they won.

What does this mean for the homeowner?

Unfortunately, the new assignment of benefits reform restricts the homeowner in their ability. While the reform suggests it is helping the homeowner in their resolution process, this isn’t always the case.

Yes, there are some predatory assignment of benefits companies out there looking to overly-monetize their efforts. On the other hand, there are a great deal of ethical companies looking to do more for the homeowner than their insurance carriers are.

It seems to us it should be the other way around, considering homeowners are paying premiums to the policyholder and not to the AOB contractor, but we’ll leave that where it is.

For the homeowners, the new assignment of benefits reform states that:

  • Some disasters will not be covered under AOB, while others will remain
  • Restrictions will be placed on dispersible amounts for emergency repairs—$3,000 or 1% of the policy limits
  • Certain requirements must be satisfied before bringing a claim against an insurer
  • AOB agreements must be provided to the insurer within three days of signing

Insurance companies are creating unique ways to counter AOB efforts

The assignment of benefits process may be helpful, although there are definitely some unethical companies out there. But when done with integrity, an AOB company can save homeowners a lot of time and headache.

Insurance companies, however, are for-profit businesses. They want to collect the highest premiums possible while paying out the lowest claims. So when a system is designed—like the assignment of benefits one—that assists the homeowner more than it does the insurance company, they combat.

While they have fought long and hard to place restrictions on AOB terms, insurance companies have also countered the system by putting their own restrictions in place. This case shows especially true with Citizens Property Insurance Corporation.

In an effort to keep money in their pockets, Citizens has now adopted a plan that states they will cap any claims where the homeowner uses their own contractor.

Come again?
Yes, you read that correctly. Use our contractors or else.

If you refuse to use Citizen’s contractor and opt to use your own instead, your claim will be capped at $10,000. This stipulation is set in place regardless of the severity of your damage.

Lost your roof and all its framing? How can you expect to have that repaired for $10,000?

Or what about something we Southern Floridians are all accustomed to: corroded cast iron pipes that give way and cause significant flooding in our homes. Will ten grand help you there?

It’s doubtful.

What options do you have?

As for-profit companies, these insurance carriers continue to amaze with their fight to preserve their billion-dollar+ valuations. They are all publicly traded companies and have their investors’ best interests ahead of their customers’.

The new assignment of benefits reform has tilted the scale in favor of the insurance companies, but it won’t go uncontested. This is something we need to—and will—fight.

If you have property damage and the AOB reform scares you into doing exactly what the insurance company says, don’t listen. You are still the policyholder and you still have the right to collect the necessary amount on your claim in order to repair your home to the way it was before.  But speak with an insurance attorney first, before you sign or agree to anything, to maximize your claim.

Don’t let the insurance companies push you into buying builder’s grade cabinets after a flood when you had custom-made before. Don’t let them force you into cheap furniture when you worked hard to purchase your original, expensive set.

If you need help fighting the rebuttals your insurance carrier tries to throw your way, give us a call. We’ve been fighting and beating these insurance companies for years now and will continue to do the same for many years to come.

They can throw all the reforms they want at us—we still side with the homeowner because we know you have rights.