Assignment of Benefits–A Moral Hazard!

Insurance 101 teaches about “Moral Hazards” –when mismanaged insurance systems incentivize individuals, often entire segments of society, to behave in irresponsible or criminal ways.

You’ve read what “some” attorneys, public adjusters, water extractors, plumbers and roofers are doing with AOB.  It’s the result of a moral hazard–bad public policy enabling and incentivizing bad behavior.

Worse, political gatherings like the recent Senate Banking and Insurance Committee workshop seem to give shorter shrift to the victims of this moral hazard–especially those that don’t play along with abusive AOB vendors.

In the Wall Street Journal article,  “What Could Raise Hurricane Irma’s Costs? Letting Contractors Handle Claims” we learn about the mistreatment of two consumers, Brooke Fehr and Kelly Laub. Both are fed up with AOB, and by implication, Florida’s lethargic approach to eliminate its immoral influence.

But, Fehr and Laub are just the proverbial tip of the iceberg!

Consider the affidavit of this single mom—a 9th grade math teacher trying to do the right thing.  Duped by a man pretending to represent her insurance company, she unwittingly embarked on a voyage of threats and intimidation from a roofing contractor she identified as Simbro Group, LLC.

“Saturday, November 19, 2016 I was in the garage with my children and a gentleman with a ladder on his truck approached me. He told me he was with the insurance company and was from disaster recovery unit…He said he wanted to go on my roof and I was very leery of him doing that.  He then said he had a paper to sign…The entire time Mr. Dykes spoke as though he was with my insurance company.  After he saw the policy, he then kept referring to Heritage, and I assumed (Stupid on my part) that he was with MY insurance company.”

The moral hazard of AOB is causing some roofers, armed with weather radar, to pretend to represent a homeowners’ insurer to obtain an AOB signature merely to inspect for “possible” damage, which they always find.  Then, they submit a grossly inflated invoice to the insurer they were pretending to represent.

Unmitigated gall!

Kellie Clark was suspicious.  She attempted to do the right thing.  When she got a check for $18,000 from Heritage Insurance Company, she called the company.  She sent the check back. She sought an estimate for roof damage from someone else.  But, the roofer representative seemed to know exactly when the check arrived and, according to the affidavit, said: “We will get you and we know where you live.”

Kellie Clark:

“I told him I would not give him the check, he ‘demanded I turn it over, or I would be in severe trouble.’  I told him I would give it back to the insurance company and he laughed and stated ‘you can’t do that, we will sue you until you lose your house, and you don’t have that kind of money’ …He continued laughing and telling me they were ‘coming after me’, and I hung up.”

And, according to Clark, they did come after her–only three minutes after the check was delivered by Fed Ex which was 1:58PM on March 14th.

“At 2:01 there was a stranger at my door for over 7 minutes, ringing the door bell, and beating on my door. He then walked into my garage. He then returned to beating on my door. I watched him through the kitchen window, and did not open the door. I was afraid of what he might do, the way he was beating on the door. I find this more than a coincidence that I had just received the check. I am very disgusted by their behavior, AND FRANKLY AM AFRAID FOR MYSELF, AND FAMILY…” [emphasis added].

 For those thinking this might be an exaggeration, I double-dog-dare you to read Simbro Group, LLC’s letter.   In my forty plus years dealing with insurance matters I’ve never read a corporate missive more threatening or more tasteless.  (See Note #1 and possible related information in Note #2 below).  As always, I am willing to print, in total, any response anyone may have to the implications of Ms. Clark’s affidavit.

In addition to roofers like Simbro, there are water firms like Pro Choice Remediation.  Similar to Kellie Clark and the two consumers in the Wall Street Journal article, Darlene Masturzo wished she’d never signed an AOB.  For the full story watch Channel 9’s Action News report on how a water tank leak in a 500 square foot manufactured home created “pure hell” for Ms. Masturzo and a $30,000 bill for her insurance company.

For months since she signed an AOB Darlene Masturzo has been unable to live in her home. Kellie Clark has been afraid to live in hers.

Watch last week’s Senate Banking and Insurance Committee. You won’t hear about Simbro or Pro Choice. You won’t hear about Kellie Clark, Darlene Masturzo, Brooke Fehr or Kelly Laub.  And, you won’t hear about a “moral hazard”.

But… you will see the faces of those who can eliminate it and, so far, have chosen not to do so.


NOTE #1: Here are just some of the troubling comments made in the letter.  Read it yourself and as you do, remember…the roofer had yet to perform any work on Kellie Clarks house.

  • “[Insurers] will check to see if a Roofing Permit has been issued at your address.  They will also do a drive by inspection to determine if you have installed the roof. If you have not they will not sell you home insurance. This holds true to all insurance carriers. No insurance=no mortgage=no home.”
  • “You do not have the right to these funds and do not have the right to return them to Heritage Property and Casualty.”
  • “Your roof has been damaged and will start to leak very soon. You will initially see a few small spots on a ceiling or wall.  Now the damage starts to cost a lot of money. Your insurance will not cover this damage since you did not get a new roof installed or take steps to prevent further damage.”
  • “In addition to water damage, black mold will start to form within 24 hours of the leak. This is a serious health hazard and a silent killer.”
  • “If you fail to do this or contact Heritage Insurance in order to stop this your actions will be damaging to The Simbro Group, LLC. I will immediately invoice you for the total amount of the check which is $18,238.50. If you do not pay this invoice within 30 days I will start foreclosure action on your house.”
  • “Do the wrong thing and you could lose a lot of money and maybe your house.”

NOTE #2: Perhaps unrelated, perhaps not, is the recent Sun Sentinel report regarding a mole at Heritage Insurance Company.  The allegation is that an attorney and a water extractor were in cahoots with an employee of Heritage that was illegally sharing proprietary and confidential claim information to harm Heritage and to unjustly enrich themselves. Presumably the employee was being paid. If true, two questions emerge: one, how widespread is this practice, and; two, is this how some roofers know which carriers insure which homes, as in the case of Kellie Clark?

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