What is an Assignment of Benefits?

An assignment of benefits (“AOB”) is a signed agreement that transfers an insured’s claim rights – either partially or in full – from their insurance policy to a third-party. A signed AOB grants third parties, such as water or mold remediation companies, the right to file a claim against your insurance company in order to collect payments for any repairs, remediation, or work performed on property damage related to an insurance claim.

What Information Must be Included in an AOB?

If you are a homeowner, it is important to understand the nature of the documents you are signing for your insurance claim. A water or mold remediation company may ask you to sign an AOB, and sometimes, even roofers or other contractors may ask you to sign an AOB. But how can you be sure that you are signing a valid document?

Florida lawmakers passed legislation on July 1, 2019 (commonly referred to as “AOB Reform”), which was later reformed to become even more restrictive on May 25, 2022 (commonly referred to as SB 2D in the industry). This legislation created Florida Statute 627.7152, which provides that a valid AOB must include:

  1. A written agreement that is executed by the insured and third-party.
  2. The written agreement must contain a provision that allows the insured to rescind the agreement without a penalty by submitting a signed notice of rescission within 14 days of the original agreement, at least 30 days after the work on the property is scheduled to begin but no work has been performed, or at least 30 days after the original agreement is signed if the agreement does not contain a commencement date and no substantial work has begun.
  3. Contain a provision requiring the third-party to provide the executed agreement to the insurance company within 3 business days after the date on which the agreement was signed, or the date on which the work begins, whichever comes first.
  4. Contain a written, itemized, per-unit cost estimate of the services to be performed by the third-party.
  5. Only perform services to protect, repair, restore, or replace a dwelling or structure or to mitigate against further damage to the insured’s property.
  6. Include a specific notice as noted in the statute in 18-point uppercase and boldface.
  7. Contain a provision requiring the third-party to indemnify and hold harmless the insured from all liabilities, damages, losses, and costs, including, but not limited to, attorney fees.
  8. The third-party must provide the insured with a written notice of intent to begin litigation before filing suit under the policy.

If the AOB agreement does not contain all of the above, then it will be deemed invalid and will be unenforceable.

Why Did Lawmakers Make These Changes?

The answer to this question is extremely convoluted, but open and honest discussions are encouraged now more than ever. If you own a home in Florida, your insurance premiums have more than likely increased significantly over the last year or two, and will likely increase again when your policy is set to renew. The narrative of misinformation would lead you to believe that this is because of excessive litigation; rampant misconduct by contractors such as roofers; and unnecessary AOB litigation. But to jump to this position without asking the questions about why there is an increase in litigation and what is causing these lawsuits is a disservice to what is really going on in the insurance industry.

When a homeowner’s claim is underpaid or denied, the homeowner can submit documentation – such as an estimate, a Sworn Proof of Loss, or request a reinspection – to ask the insurance company to reconsider their decision. But if the insurance company refuses to do so, or stands on their initial determination, what other option is the insured left with other than filing a lawsuit? Depending on the insurance policy, they could ask the insurance company to mediate the dispute, or can request an appraisal, but the insurance company doesn’t always agree. In those instances, the only remaining option is to file a lawsuit.

Similarly, water and mold remediation companies submit their AOB invoices to insurance companies, and are many times left with no other option but to pursue litigation. Following the July 1, 2019 reform, the AOB companies were required to upload a Notice of Intent to Initiate Litigation to the insurance company, providing the insurance company with a ten business day period before the AOB company could file a lawsuit, which was intended to allow the insurance companies the opportunity to resolve AOB claims without having to pay attorney’s fees. But even when the insurance companies were given this opportunity to avoid litigation, they chose not to do so. Following the May 25, 2022 legislation, the lawmakers stripped the homeowners of their ability to assign the right to attorneys’ fees to the AOB contractors. This was believed to result in a drastic reduction in the number of AOB lawsuits that would be filed, but really, all it did was work against the consumers/policyholders once again.

The purpose of an AOB agreement was to allow the homeowner the ability to assign the portion of their insurance policy relating to emergency remediation efforts to a professional, who would dry up water or remove mold without forcing the homeowner to pay thousands of dollars out of pocket, while preventing this damage from getting worse. Instead, the homeowner is left with a tough dilemma – forced to choose between paying thousands of dollars up front to have someone do the work, or even worse, to let the water or mold sit there and accumulate because they cannot afford the former. With insurance premiums increasing more and more every year, policyholders are being stripped away of more and more of their policy rights, but should a policyholder choose to sign an AOB agreement, be sure that it contains all of the requirements listed above.

Contact the Gelber Law Group for more information

Living with property damage can be stressful, and the insurance claim process can be lengthy. If you encounter property damage and your insurance claim has been denied or underpaid, contact Gelber Law Group, PA to assist you with a free consultation at 954-320-0100.

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