What is an assignment of benefits (AOB) form?

The AOB gives the third party the right to file a claim, make decisions about the repair as well as collect payment from the insurance company, all without the involvement or approval of the homeowner.

As homeowner insurance rates continue to climb in Florida there is a good chance that you have seen news reports about assignment of benefits (AOB) fraud and how it affects homeowner rates in the Sunshine state.

We thought it might be a good idea to have a look at what an AOB is and how it is impacting rates as well as what the legal ramifications are if you decide to sign an AOB.

What is an AOB exactly?

An Assignment of Benefits form or AOB is a legal document that is signed by the policyholder. Once it has been signed an AOB transfers the insurance claims rights or the benefits of policy to a third party such as a contractor, or roofing company.

The AOB gives the third party the right to file a claim, make decisions about the repair as well as collect payment from the insurance company, all without the involvement or approval of the homeowner.

As an example, if your roof is damaged during a storm and you call in a roofing company to repair it and sign an AOB the roofing company can file a claim on your behalf and they will be paid directly from the insurance company.

It is important to remember that an AOB is a legal contract and once signed it is immediately legally binding. There is no right of recession, after it is signed the company or person you have the contract with has the legal right to enforce all terms of the contract.

AOBs have been in the Florida marketplace for over 100 years and while commonly used with life and health insurance policies for decades, in recent years AOBs have moved into homeowners insurance claims.

While using an AOB can be helpful for claimants who need help navigating the claims process, when it is abused it can push up rates for everyone.

AOBs are Being Abused

Unfortunately, in recent years AOB abuse has skyrocketed, causing problems for insurance companies and resulting in higher premiums for many homeowners, regardless of whether they have filed a claim.

Data from the Department of Financial Services shows that in 2006 there were only 405 AOB lawsuits across all of Florida. This number was 28,200 by 2016.

Less than honest contractors and roofing companies are using AOBs to submit inflated claims and when the claim is denied or disputed by the insurance company, lawyers who have partnered with these shady businesses step in and sue. In most cases, it is cheaper for an insurer to settle than fight the lawsuit, which leads to more fraudulent claims.

The scope of AOB fraud has led to higher premiums for all homeowners in certain areas of the state. While lawmakers have attempted to address AOB fraud in the past few years, they have been unable to pass any meaningful legislation.

AOB and Claim Tips

Here are a few things to remember when dealing with an AOB and filing a claim on your homeowners insurance policy:

• When you sign an AOB you are signing over the benefits and rights of your insurance policy to a third party.
• The insurance company can no longer communicate with you regarding a claim once you sign an AOB, they will only communicate with the third party.
• When you sign an AOB all rights to your insurance claim are lost which includes the right to make any decisions about the claim as well as the right to mediate the claim.
• In some cases, the third party may have the right to endorse checks on your behalf.
• An AOB allows the third party to file a lawsuit against your insurance company with or without your approval or knowledge.
• It is possible for the third party to put a lien on your home or assess penalties and financial fees if you fail to comply with the AOB.
• If your home has been damaged be sure to review your policy so you understand your coverage. Contact your agent with any questions.
• Before you sign a repair contract with a contractor, roofer or other repair company carefully review it to ensure you are not signing a contact with an AOB included.
• Remember, under no circumstances do you need to sign an AOB to get your home repaired and any contractor, roofer or repairperson that tells you differently is not being honest.
• If you decide to go the AOB route, carefully review the contract and ask questions about anything you do not understand. Finally, remember that an AOB is a binding legal contact that cannot be changed or cancelled once you sign.