Assignment of benefits (AOB) abuse is rampant in Florida, enriching shady contractors and unscrupulous attorneys while driving up home insurance premiums for consumers across the state.
An AOB allows an insurance policyholder to transfer the rights to insurance benefits to a third party, such as a contractor, to speed up the billing process. The contractor is then able to get paid by the insurance company directly after making repairs.
It sounds convenient, but while many homeowners don’t realize it, AOB agreements are being used by some dishonest home repair companies and their lawyers to take control of a homeowner’s policy and file inflated reimbursement claims.
Due to outdated rules that put insurance companies at a disadvantage in litigation, carriers often choose to pay the padded claims to avoid a lawsuit. These inflated reimbursements ultimately trickle down to consumers in the form of premium increases.
AOB abuse has increased dramatically over the last decade, from 4,986 AOB-related lawsuits in 2007 to 129,781 last year. If the legislature fails to address this problem soon, premiums are expected to increase by more than 60 percent over the next five years in Broward and Miami-Dade and more than 50 percent in Clay and Duval counties. Statewide, homeowners are projected to see average premium increases of nearly 30 percent.
But it’s easy to get lost in the numbers and overlook the human cost of this crisis. The Consumer Protection Coalition organized by the Florida Chamber of Commerce has collected the stories of many Floridians who have fallen victim to AOB schemes.
For example, Barbara, a resident of Weeki Wachee, called a water restoration company after she noticed a leak under her kitchen sink. When the company asked her to sign an AOB, she did, not realizing what it was. The workers then proceeded to pull out her kitchen island, break several of her granite countertops, damage the sink, and rip up the flooring.
Throughout the process, Barbara and her husband were left in the dark, not knowing when workers would arrive, what they were doing, and the cost of the repairs. Barbara wasn’t even fully consulted on new cabinets that were installed. After the lengthy and upsetting process, Barbara learned that the company charged her insurance carrier $36,000 for the repairs.
Darleen tells a similar story. When a pipe broke in her home in Davenport, she sought the services of a water mitigation company. “We’re going to take care of everything,” they told her and asked her to sign an AOB. Darleen soon realized that the repairs were much more substantial than she had expected. The water mitigation company called in an air quality company, without Darleen’s permission, and sealed off much of her home, forcing her to relocate for six months.
Darleen called the insurance company to see what was going on and learned for the first time what an AOB was and that she had relinquished control over her insurance policy without even realizing it. “I gave them the rights to just do whatever they wanted, and I had no idea that I had done that,” she said. In the end, her insurance company was billed about $28,000 on her $35,000 policy.
These personal stories are powerful testaments to the need to reform Florida’s insurance laws to protect homeowners and prevent further harm. Growing numbers of Floridians are seeing themselves taken advantage of, and until the legislature addresses this crisis, more homeowners like Barbara and Darleen will be victimized by this racket.