Imagine waking up to a flooded kitchen due to a pipe burst. The first thing that you think to do is call a water damage restoration company that shows up quickly and just states “Don’t worry about a thing! Just sign these forms and we will take care of everything.”
What you’ve just done is completely signed away control of your insurance claim, and you may have even permitted third parties to inflate the cost of the work that is done on your property. By doing this, you could be sued or even face a lien on your property for the difference between what the insurance company owes the contractor and what was actually billed.
This has been a big problem in Florida recently, and this is causing homeowners to pay higher insurance rates because of these exaggerated claims. When you sign over your rates to the emergency contractor, it is called an Assignment of Benefits form or an AOB. These are usually provided by contractors, usually for emergency services, and they must be read very carefully.
By signing an Assignment of Benefits agreement, essentially you are allowing your contractor to collect your claim settlement reimbursement directly from your insurance carrier. Unfortunately, this has resulted in a lot of homeowners losing control of the claim process on their property, and it could also mean that the homeowner will have to pay large amounts beyond what is actually covered in their policy. The contractor could then place a lien on the home, and in Florida, the contractor’s lies can be enforced by foreclosure.
These agreements can be abused by vendors who want to keep their customers in the dark about the status and cost of their claim. What is even worse is that when these contractors present the insurance company with an inflated claim, they will use the AOB as a means to sue the insurance company on behalf of the homeowner.
An Insurance Consumer Advocate stated that this issue in particular is driving up homeowners insurance rates by about 17 percent each year in Florida alone. In some parts of the state, claims that are settled with an AOB averaged about $32,000, which is nearly triple as much compared to claims that are settled without one.
To add to the chaos, Citizens Insurance stated that it pays out 27 cents in water damage claims. Just in Miami-Dade County alone, Citizens paid out 51 cents of every dollar on water claims. Essentially, Citizens was spending more money on water claims than it was on preparing for the next hurricane.
Florida lawmakers are now evaluating how to stop this before it gets any worse. If this situation does get fixed, it will allow the consumers to stay involved in their own insurance claim while still permitting the use of assignment of benefits.
To avoid this mess, you should first call your insurance company after sustaining a loss. Your insurance company can recommend an emergency contractor for you that has been qualified with the state and has no outstanding complaints against them. The insurance company will always provide you with a company that has a valid license and a track record of providing professional service. Also, chances are they will not require you to sign forms that include the assignment of benefits.