Assignment of Benefits…The Brewing Storm!

There’s a storm brewing! Widespread mistreatment of consumers by emergency remediators, mostly water extraction contractors and roofers, continues with no end in sight. Lured by the potential of huge payoffs with little chance of any consequences and enabled by Assignment of Benefits (AOB) they routinely kidnap the claim and leave premium payers with the ransom note.

Maybe now, with elections over and recognition seemingly expanding exponentially, lawmakers will slam this ugly door shut. Maybe not.

Consumers are certainly fed up. I’m in contact with several who complain about roofers and water extractors. (See NOTE #1 below).

Public adjusters are in the hunt. They resent being relegated to the back of the line where they powerlessly watch sundry remediators control the claim and publicly adjust without a license. (See NOTE#2 below)

Get a real life feel for what’s happening by watching a report from Orlando’s Action 9 News.  A far-to-typical scenario, it concludes with the insurance expert, Rod Livingstone, a public adjuster, declaring… “it’s absolutely crazy signing a contract assigning benefits”.

Even some of the industry’s more prominent critics agree. Up to a point.

Merlin Law Group attorney, Nicole Vinson, warns consumers to be aware of the difference between assigning benefits and assigning responsibilities under the policy. Fact is, most claimants don’t realize that when a water contractor says “We’ll take care of everything” they aren’t referring to the claimants responsibilities to protect the damaged property, give an examination under oath or to submit a proof of loss. (See NOTE #3 below).

Chip Merlin’s November 10, 2014 blog helps explain where Florida’s Insurance Consumer Advocate (ICA) is on AOB and the restoration industry in general. Commenting on Steve Burgess’s presentation to FAPIA (The Florida Association of Public Insurance Adjusters), Merlin wrote…

“This industry[restoration, water extractors, etc] has little oversight. He[Burgess] has a legion of examples and questioned whether insurance companies should be subject to assignment of benefits to contractors. He said over 100 cases were currently assigned for investigation regarding improper insurance restoration actions and work. He noted that multiple subcontractors have full assignment of benefits and otherwise engage in the unauthorized practice of public adjusting.” Emphasis added.

The Florida Property & Casualty Fraud Task Force has assembled an extremely helpful “consumer advisement”. One every insurance agent and carrier should spread far and wide.  Titled “Homeowners Know Your Legal Rights” it cites statutes, offers fraud avoidance tips, and provides phone numbers, websites and avenues of assistance for AOB victims.

And, of course, even if lawmakers haven’t been willing to act, some insurers are.

Example: the website of American Integrity Insurance Company (AIIC) has a warning to policyholders to never sign a contract assigning benefits. Separately it emailed its agents…

“When your policyholder has a claim, make sure they don’t sign any documentation with the legal phrase “assignment of benefits”. This type of contract will remove all rights to the claim away from the policyholder. Not only can your customer suffer, but your loss ratio will too!”

AIIC’s Amanda Richter used the cost driving characteristics of AOB to warn consumers to “Just say no”. And, consistent with other carriers (except Citizens) she reveals twenty percent (20%) of AIIC’s water damage claims have AOB. On average those claims cost 34% more than their non-AOB counterparts. (See NOTE#4 below)

AOB also makes it possible for plumbers to get their piece of the consumer’s pie. Read the post from Amy Robinson with Arizona Carpet Restoration warning such fee’s “…often cause unethical practices.” And worse, in addition to acknowledging they lead to the restoration company “inflating” the bill she explains that Often times it’s the individual plumber receiving the kickback, and the plumbing company, meaning their boss, is not even aware of it”.

Last but, far from least, is an action filed by Security First Insurance Company (SFIC) after the OIR denied its request for policy language requiring the carrier’s written approval in order for any post loss assignment to be valid.

While court decisions are, at best, unpredictable, if you read SFIC’s initial brief  you’ll find nothing but solid ground.   A decision could come within 30 days or take as long as six months.

But, here’s the thing. 

If SFIC wins this case it’s likely the OIR must approve similar form language for other carriers.   And that means, barring other complications, the AOB problem conveniently and thankfully goes away.

Best stay tuned, as the outcome of this suit determines much of the industry’s plan of work for the foreseeable future.


NOTE #1: CFO Jeff Atwater announced the arrests of five NBRC Roofing Company employees for organizing a $525,000 insurance fraud scheme that left 97 homeowners in Hernando, Hillsborough, Manatee, Pasco, Pinellas and Sarasota counties with unfinished roof repairs and liens on their homes. NBRC had convinced “…the homeowners to give NBRC the sole right to make the repairs and the assignment of benefits for the insurance claim.”

NOTE #2: Respected public adjuster Dick Tutwiler quotes St. Petersburg attorney, Robert S. Walton, III as follows:

“… these guys (the restoration contractors) impose a lien. There is a suit going on over in Orlando, where the homeowner counterclaimed for fraud because the remediation company pursued him when it turned out to be a flood policy and there were no assignments. There is no standard for ethics. Adjusters have that as a matter of law. There is recourse against company, independent and public adjusters. The water remediation and restoration people are no holds barred. They interpret coverage’s, request policies, send letters, make demands, negotiate costs of repair and cost of water extraction and drying. They bargain. They also go directly to lawyers based upon the assignment without consulting the insured because that is in their contract. An adjuster -whatever his or her stripe, cannot do that.”

NOTE #3: See Shaw v. State Farm Fire & Cas. Co., 37 So. 3d 329 (Fla. 5th DCA 2010). The court held that when the assignee has only agreed to an assignment of “benefits”, the assignment does not include a transfer of the policyholder’s duties under the contract.

NOTE #4: Richter’s AOB blog offers consumers three steps, as follows:

  1. Call your insurance company first when you have a claim: they can help you partner with a reputable contractor and help explain what an “Assignment of Benefit” really means.
  2. Read any document you’re asked to sign: a contractor should only require you to sign a work authorization so if you see the phrase “Assignment of Benefit” do not sign.
  3. Beware of plumber referrals: Ask if your plumber receives any compensation for referring you to the water damage company. Reputable plumbers refer based on quality of work, not referral fees.

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  1. The following Public Adjuster asked that I post this comment for him.

    Hi Scott; as always your articles are excellent. The AOB Document is worse than…private property confiscation done by some Communist governments without compensation to the legitimate owners.

    Wilbert M. Gomez
    P. Adjuster
    Miami Specialty Contractor

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