Assignment of Benefits in Florida
Do you own property or rent in the state of Florida? If so, it may be to your benefit to learn about how you can assign property insurance benefits and rights to a third party who is not otherwise involved with the property. People have used AOBs with life insurance and health insurance policies for many years, but many now realize how AOBs can benefit renters and property owners.
Assignment of Benefits Definition
The Insurance Information Institute (III) says an assignment of benefits is an efficient, customer-friendly way to settle claims where a policyholder allows a third party, such as a repair shop, to bill the insurance for the repairs directly. An AOB is like a power of attorney. You are allowing another party to act for you without even consulting you before acting.
The III says this arrangement is unique to Florida and that despite efforts to curtail the use of AOBs, their use has grown. Initially used in personal auto insurance and homeowners insurance policies, the use has expanded to other insurance types. A third party can provide a service, file a claim, and follow up for policyholders.
Irrevocable Assignment of Benefits
If the term irrevocable is part of the AOB agreement, it means that you intend to give up your rights to that claim and not take them back at a future date. If you change your mind later or if the third-party defaults or poses issues, you cannot get rights to the claim back.
An Assignment of Benefits is a legal contract, and once it becomes legally binding, you will be held to the terms as written. Carefully read over your agreement and make sure that you understand the terms. Before you sign an AOB, you may want to have a trusted professional review it with you.
Can I Cancel My Assignment of Benefits in Florida?
To cancel an AOB, the contract must contain these three specific cancellation provisions:
- There must be a firm clause allowing you to take back your rights if you provide written notice to the third party within 14 days.
- You need a clause that will enable you to rescind the contract if at least you have passed, but the third party has not yet begun substantial work on the property if there is no start date in the contract.
- You also need the right to rescind if the third party has not yet substantially complied 30 days after the start date.
Assignment of Benefits AOB Abuse Florida
Unfortunately, the use of AOBs in Florida has led to a great deal of abuse. This abuse leads to lawsuits, which leads to legal costs and higher insurance rates for everyone.
There were about 1,300 AOB lawsuits in Florida in 2000, more than 79,000 in 2013, and nearly 135,000 leading up to November 9, 2018. This number is a 70% increase in just five years and represents over $2.5 billion in insurer's legal costs in the past dozen years -- these costs get passed down to Florida homeowners.
Florida has what is referred to as "one-way attorney fees," meaning that if a plaintiff sues an insurer and loses, the insurer cannot recover attorney’s fees related to the claim. The insurer can save money by paying inflated claims rather than going through the legal process to fight. It may be far less expensive to pay a pre-suit settlement offer than litigate several cases.
Florida lawyers and the contractors they work with know this. They have teamed up to game the system in many cases. That is what is driving the cases up, and ultimately insurance rates of Florida homeowners.
Should I Sign an Assignment of Benefits?
There is no question that it may be more convenient to sign an Assignment of Benefits and let someone else handle the insurance claim, but you do not have to sign an AOB to get your necessary repairs completed.
When you sign over your rights to manage your claims, you lose control of your claim and give away your ability to keep an eye on what your insurance company is paying. Many contractors and restoration companies have taken advantage of this lack of oversight to make inflated claims and even file insurance claims for work that is never even started. That gives them the incentive to walk away with the money and not do the job or do the job well.
As a policyholder, you also leave yourself vulnerable in other ways. Once you sign over your rights, the contractor may even be able to endorse checks for you. If the third-party worker fails to follow the terms and conditions in your original insurance policy, your insurance carrier may refuse to pay the claim. That leaves you liable for the repairs yourself.
Also, do not be surprised if your insurer cancels your policy after paying the claim if they suspect fraud or if your claim amount is exceedingly high. You might think you can just go to another carrier, but that is not always the case. All claims and policy cancellations go on your insurance record, which hurts your "insurance score," which is like a credit score. If another carrier sees you as a high-risk homeowner, they can deny coverage.
The best-case scenario is that your insurer keeps you but raises your insurance premiums.
AOB Law - Florida
The high amount of AOB litigation led to work by the Florida legislature for AOB reform. The legislative body passed a law on May 23, 2019, to try to prevent insurance fraud. There were no Florida statutes to address some issues brought up by AOBs, but HB 7065, or Fla stat 627.7152, was enacted to address that. Under HB 7065, AOB requirements were strictly laid out, and it addressed each party's responsibilities and concerns.
Insurers wanted to decrease AOB lawsuits, and consumers wanted to decrease higher premiums imposed on them because of state-wide AOB abuse.
Citizens Insurance was most hurt by AOB claims and proposed a premium increase for 97% of consumer's policies in 2019. The new law seems to be helping both consumers and Citizens. They reported that 44,000 Citizens' policyholders saw premiums drop in 2020 because of the new AOB law.
The most significant restriction the new law imposes is that insurers can now eliminate AOB claims or parts of AOB claims in a policyholder's contract. Citizens Insurance's response was to provide the insured an option to keep a policy that allows AOB claims for higher premiums and a lower rate for a policy that disallows AOB claims.
It also required third-party vendors and policyholders to define "assignment agreements" in the policyholder's AOB contract language. The language must comply with section 627.7152 for AOB contracts as described in the new law. Section 627.7152 is essentially an AOB contract. If your AOB contract does not comply with this language, it is not valid under Florida law.
Assignment of Benefits - Roofing
One reason homeowners use an AOB is so that they can more efficiently handle roof repairs. If you have minimal or severe roof damage, you need to act quickly to prevent water damage. The new Florida law lays out what should be in the AOB, but it also adds extra responsibility to the roofer.
Once the agreement is signed, the AOB transfers your insurance responsibilities to the contractor. The roofing company is responsible for providing a copy of the AOB contract to the insurer within three business days of starting work or executing the agreement, whichever is sooner. It must comply with Florida AOB law section 627.7152.
If a roofer intends to sue the insurer, they must notify the insurer of such 10 days prior to filing the lawsuit.
Assignment of Benefits Form Roofing
The AOB form for a roofing job is the same as any other kind of AOB but modified for the circumstances. The AOB must be signed and state the services to be performed and an itemized per unit cost estimate for materials.
Once you have signed an AOB, you become legally responsible for whatever the third party does. That includes legal matters, and you can be held criminally liable if you are careless and choose a dishonest contractor. Maintain records in a safe place, so you can always prove your position.
Assignment of Benefits Contract
Because an AOB is a contract, it must meet specific requirements. Besides the items allowing you to rescind the agreement, a valid AOB contract will contain an itemized estimate. The AOB can only cover services provided by law.
A valid AOB will not allow for items such as a check or mortgage processing fee, a cancellation fee, or an administrative fee. If the AOB does not comply with these terms, it is invalid, and the Courts will not enforce it.
Assignment of Benefits Form Florida
The Florida Office of Insurance Regulation has more information on knowing if your AOB form is legitimate. Check the company information and look for any red flags. If you use Citizens Property Insurance, they may be able to help. Ensure that your AOB includes all the necessary information about the work to be performed and any potential costs.
If you are not sure if you should sign an AOB, you can call us to help you evaluate your situation. It could be in your best interest as a convenient way to get your work done quickly and efficiently, but it may also be a bad move.
Hope that helps!
At your service,