This article was originally published in the Lynn Haven Ledger as an insurance article in October, 2015.
That stimulating smell of freshly brewed coffee – the best way to start your day! Gary’s feet hit the floor and his mind began listing off items on his to-do list for the day. He was still rubbing the sleep from his eyes as he sauntered toward the kitchen of his cozy two bedroom cottage.
It was only six months ago. The location and size were perfect for him. True, the house was a little older, but he was updating things. In another six months he would have a party with his friends to celebrate the completion.
As he walked across his carpeted living room, his feet suddenly felt wet. He stopped and looked down, his face registering confusion, then his eyes traveled to his newly tiled kitchen floor, and his stomach did a flipflop.
Incongruously, a shallow pond was there with more water spraying out from under the sink.
Gary’s brain engaged fully, and he immediately found the shut-off valve. Then he went back to his flooded kitchen, forgetting about his coffee, and surveyed the damage.
Insurance agent. Water remediation company. Plumber. Got to call my agent and file a claim, then call a professional to get this water out of here, and a plumber to fix whatever broke. There went his Saturday morning to-do list. It was going to be a long and frustrating day.
The water remediation company was prompt. They showed up within the hour with hoses and fans of assorted sizes. They shoved some paperwork under Gary’s nose and told him – ‘here, sign these so we can get this taken care of. We’ll deal directly with your insurance company so you don’t have to.’
Gary signed.
What he didn’t realize was that one of the documents he signed was an Assignment of Benefits, giving up all of his rights to work with his insurance company.
“This crisis is poised to cost Florida homeowners millions in increased insurance costs as insurance companies are inundated with fraudulent or inflated claims. Worse, a number of unlucky people will have their home equity put at risk when unscrupulous contractors who can’t get their fraud past the insurance companies turn around and put liens for the balance on the homes involved.
It all stems from Assignment of Benefits, a legal provision that allows the insured to sign over an insurance claim to a contractor who is going to handle repairs. The contractor then makes the claim and is paid directly by the insurance company, instead of billing the homeowner.” (Seannon Nichols, June 12, 2015, American Integrity blog)
This has gotten so bad, there’s been legislation (CS/HB 669) introduced to try and stop this.
Scott Johnson, former executive director of the Florida Association of Insurance Agents, posted a blog on his website under the headline “AOB … an ugly iceberg.” Here’s what he said:
“Well, guess how many AOB lawsuits (for all lines) have been filed against insurers in just the last two years — go ahead, guess! Would you believe 92,521. And get this. Back in 2005 and 2006 there were only 9,424 AOB lawsuits — an explosion of nearly 1,000 percent!”
So if you’re wondering why your insurance premiums keep going up, AOB fraud is high on the list of reasons.
“…water mitigation claims with an AOB assignment come in 34 percent higher than claims without an AOB. One Florida insurer reports it is paying 27 cents of every premium dollar it collects on water mitigation claims.” (Seannon Nichols, June 12, 2015, American Integrity blog)
Fraud is the big word with AOBs – billing the insurance company for more than the actual cost of the damage sustained. In some cases, tens of thousands above what should have been billed.
So how can you stay safe when you’re in a desperate situation? Take the time to read everything carefully and look out for anything that says ‘Assignment of Benefits’.
Knowledge is power.
