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The Assignment of Benefits & Your Homeowners Claim

Posted on behalf of Gordon & Partners on July 23, 2013 December 7, 2022 in Insurance Claims

What rights does an insured have after assigning any and all insurance rights, benefits, and proceeds under the homeowners insurance policy to a third party?

Homeowners that have experienced the frustration of dealing with a loss to their home, whether by flood, fire or hurricane, can attest to the stressful nature of the re-building process. As soon as practical, the homeowner typically hires a disaster/mitigation crew, contractor, or other repair/mitigation service (hereafter collectively referred to as restoration service(s)).

Most of these restoration services require the homeowner to sign a document called an Assignment of Benefits, prior to commencing any work. Stuck with a limited amount of options and under great stress, the homeowner signs the Assignment of Benefits and the restoration work begins. This assignment essentially allows the restoration service company to perform its work on credit or with no immediate payment by the homeowner, leaving the homeowner with the comforting satisfaction that the restoration company will collect its fee for service from the homeowners insurance company directly.

A typical Assignment of Benefits states, in part, as follows:

I, the Owner/Agent for the job site listed below, authorize RESTORATION SERVICE to enter my property, furnish materials, supply all equipment and perform all labor necessary to preserve and protect my property from further damage.

Assignment of Insurance Benefits and Direct Payment Authorization:

I hereby assign any and all insurance rights, benefits, and proceeds under any applicable insurance policies to RESTORATION SERVICE. I also hereby authorize direct payment of any benefits or proceeds to RESTORATION SERVICE. I make this assignment and authorization in consideration of RESTORATION SERVICES agreement to perform services and supply materials and otherwise perform its obligations under this contract, including not requiring full payment at the time of service.

While it was most likely not the intent of the homeowner to assign all his or her rights to the restoration service, a plain reading of this sample Assignment of Benefits is leading insurance companies to argue that the homeowner has assigned any and all insurance rights, benefits, and proceeds under the applicable policy, including those available for the re-build of the home and under Coverages C and D, to the third party restoration service. Some insurers are taking the position that by assigning any and all insurance rights, benefits, and proceeds under the applicable policy, homeowners have relinquished all claims available under the policy, including Additional Living Expenses and Personal Property. See Schuster v. Blue Cross & Blue Shield of Florida, Inc. , 843 So.2d 909 (Fla. 4 th DCA 2003) (holding that an unqualified assignment served to eliminate the insureds standing to bring a claim against the insurer). It is extremely rare for homeowners to intend to assign their right to be paid for damage to their personal property to a restoration service. Similarly, homeowners usually do not intend on assigning their rights to be paid for Additional Living Expenses they must incur as a result of being ousted from their home. Good business ethics dictates that the restoration service probably did not intend for the assignment to limit the homeowners ability to pursue these benefits from their insurance company. Regardless of the seemingly obvious intent of the parties, insurance companies are using these unqualified assignments (assignments that assign all the rights, benefits and proceeds) to preclude homeowners from obtaining benefits under their own homeowners insurance policy in favor of the restoration service.

Interpreting the assignment in a light most favorable to insured is one way to recover benefits under the homeowners policy after the assignment of benefits has been executed. The two most prominent ways to attack the validity of a properly executed assignment is to (1) find the assignment vague and ambiguous or (2) find the assignment qualified. Where terms of agreement are unambiguous, the parties’ intent must be discerned from the four corners of the document; in the absence of ambiguity, language itself is the best evidence of the parties’ intent, and its plain meaning controls. Fecteau v. Se. Bank, N.A. , 585 So. 2d 1005 (Fla. Dist. Ct. App. 1991). A homeowner can assert that there is no claim number or date of loss identifying the rights or claim that was purportedly assigned. Additionally, the assignment could be vague or ambiguous to the extent that it assigns all rights, but then limits the assignment by stating in consideration of RESTORATION SERVICES agreement to perform services and supply materials and otherwise perform its obligations under this contract. Moreover, this limiting language arguably indicates that the assignment only conveys rights to payment for services rendered by the restoration service company. When the assigned rights are limited by the language of the assignment, then the assignment is qualified and requires the agreement of all parties involved (spouses, co-owners, mortgagees etc) to be valid. In the majority of cases, the intent of the parties to the assignment was to limit the assignment to the right to payment for the services rendered. One last option the homeowner has available is to seek a re-assignment of benefits from the Restoration Service.

After the restoration company has rendered its services, the insured is usually left with a moisture free home that has holes in the drywall, holes in the kitchen cabinets, and no flooring. As the insured still has to pursue its insurance carrier for benefits to rebuild their home, additional living expenses, and possible contents damage, the insured is the real party in interest. That is, the person in whom rests, by substantive law, the claim sought to be enforced. Weiss v. Johansen , 898 So.2d 1099 (Fla 4 th DCA 2005). The insured is the one who is obligated to comply with all policy conditions and is in the best position to pursue the claim.

As the homeowner is the real party in interest, the Assignment of Benefits in favor of a restoration service should not be construed as a blanket assignment that deprives the insured of claims for payments above and beyond the restoration service work performed. The intent of the parties is the fundamental contract principle that may afford the insured benefits under the policy of insurance after an Assignment of Benefits has been executed. The insurer lacks standing to challenge the intent of the parties to the Assignment of Benefits. See Progressive Express Ins. Co. v. McGrath Community Chiropractic , 913 So.2d 1281 (Fla 2 nd DCA 2005). Therefore, there is a strong argument that an insured has not relinquished all benefits afforded by the policy after the insured has signed an Assignment of Benefits related to work performed by a restoration company.

A restoration company is entitled to full and complete payment for services rendered and an Assignment of Benefits is one way to obtain payment. Contrary to the insurance companies’ belief, those benefits do not have to be paid at the exclusion of benefits to the insured, and the restoration company and insured can surely coexist in the realm of homeowner’s insurance.

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Assignment of Benefits for Contractors: Pros & Cons of Accepting an AOB

22 articles

Insurance , Restoration , Slow Payment

When a property owner files an insurance claim to cover a restoration or roofing project, the owner typically deals directly with the insurance company. They may not have the funds available to pay the contractor out of pocket, so they’re counting on that insurance check to cover the construction costs.

But insurance companies often drag their feet, and payments can take even longer than normal. Contractors often wish they could simply deal with the insurance company directly through an assignment of benefits. In some circumstances, an AOB can be an effective tool that helps contractors collect payment faster — but is it worth it?

In this article, we’ll explain what an assignment of benefits is, and how the process works. More importantly, we’ll look at the pros and cons for restoration and roofing contractors to help you decide if an AOB is worth it . 

What is an assignment of benefits? 

An assignment of benefits , or AOB, is an agreement to transfer insurance claim rights to a third party. It gives the assignee authority to file and negotiate a claim directly with the insurance company, without involvement from the property owner. 

An AOB also allows the insurer to pay the contractor directly instead of funneling funds through the customer. AOBs take the homeowner out of the claims equation.

Here’s an example: A property owner’s roof is damaged in a hurricane. The owner contacts a restoration company to repair the damage, and signs an AOB to transfer their insurance rights to the contractor. The contractor, now the assignee, negotiates the claim directly with the insurance company. The insurer will pay the claim by issuing a check for the repairs directly to the restoration contractor. 

Setting up an AOB

A property owner and contractor can set up an assignment of benefits in two steps: 

• The owner and the contractor sign an AOB agreement
• The contractor sends the AOB to the insurance company

Keep in mind that many states have their own laws about what the agreement can or should include .

For example, Florida’s assignment of benefits law contains relatively strict requirements when it comes to an assignment of benefits: 

• The AOB agreements need to be in writing. The agreement must contain a bolded disclosure notifying the customer that they are relinquishing certain rights under the homeowners policy. You can’t charge administrative fees or penalties if a homeowner decides to cancel the AOB. 
• The AOB must include an itemized, per-unit breakdown of the work you plan to do. The services can only involve how you plan to make repairs or restore the home’s damage or protect the property from any further harm. A copy must be provided to the insurance company. 
• A homeowner can rescind an AOB agreement within 14 days of signing, or within 30 days if no work has begun and no start date was listed for the work. If a start date is listed, the 30-day rule still applies if substantial progress has not been made on the job. 

Before signing an AOB agreement, make sure you understand the property owner’s insurance policy, and whether the project is likely to be covered.

Learn more: Navigating an insurance claim on a restoration project

Pros & cons for contractors

It’s smart to do a cost-benefit analysis on the practice of accepting AOBs. Listing pros and cons can help you make a logical assessment before deciding either way. 

Pro: Hiring a public adjuster

An insurance carrier’s claims adjuster will inspect property damage and arrive at a dollar figure calculated to cover the cost of repairs. Often, you might feel this adjuster may have overlooked some details that should factor into the estimate. 

If you encounter pushback from the insurer under these circumstances, a licensed, public adjuster may be warranted. These appraisers work for the homeowner, whose best interests you now represent as a result of the AOB. A public adjuster could help win the battle to complete the repairs properly. 

Pro: More control over payment

You may sink a considerable amount of time into preparing an estimate for a customer. You may even get green-lighted to order materials and get started. Once the ball starts rolling, you wouldn’t want a customer to back out on the deal. 

Klark Brown , Co-founder of The Alliance of Independent Restorers, concedes this might be one of the very situations in which an AOB construction agreement might help a contractor. “An AOB helps make sure the homeowner doesn’t take the insurance money and run,” says Brown.  

Pro: Build a better relationship with the homeowner

A homeowner suffers a substantial loss and it’s easy to understand why push and pull with an insurance company might be the last thing they want to undertake. They may desire to have another party act on their behalf. 

As an AOB recipient, the claims ball is now in your court. By taking some of the weight off a customer’s shoulders during a difficult period, it could help build good faith and further the relationship you strive to build with that client. 

Learn more : 8 Ways for Contractors to Build Trust With a Homeowner

Con: It confuses payment responsibilities

Even if you accept an AOB, the property owner still generally bears responsibility for making payment. If the insurance company is dragging their feet, a restoration contractor can still likely file a mechanics lien on the property .

A homeowner may think that by signing away their right to an insurance claim, they are also signing away their responsibility to pay for the restoration work. This typically isn’t true, and this expectation could set you up for a more contentious dispute down the line if there is a problem with the insurance claim. 

Con: Tighter margins

Insurance companies will want repairs made at the lowest cost possible. Just like you, carriers run a business and need to cut costs while boosting revenue. 

While some restoration contractors work directly with insurers and could get a steady stream of work from them, Brown emphasizes that you may be sacrificing your own margins. “Expect to accept work for less money than you’d charge independently,” he adds. 

The takeaway here suggests that any contractor accepting an AOB could subject themselves to the same bare-boned profit margins. 

Con: More administrative work

Among others, creating additional administrative busywork is another reason Brown recommends that you steer clear of accepting AOBs. You’re committing additional resources while agreeing to work for less money. 

“Administrative costs are a burden,” Brown states. Insurers may reduce and/or delay payments to help their own bottom lines. “Insurers will play the float with reserves and claims funds,” he added. So, AOBs can be detrimental to your business if you’re spending more while chasing payments. 

Con: Increase in average collection period

Every contractor should use some financial metrics to help gauge the health of the business . The average collection period for receivables measures the average time it takes you to get paid on your open accounts. 

Insurance companies aren’t known for paying claims quickly. If you do restoration work without accepting an AOB, you can often take action with the homeowner to get paid faster. When you’re depending on an insurance company to make your payment, rather than the owner, collection times will likely increase.

The literal and figurative bottom line is: If accepting assignment of benefits agreements increases the time it takes to get paid and costs you more in operational expense, these are both situations you want to avoid. 

Learn more: How to calculate your collection effectiveness 

AOBs and mechanics liens

A mechanics lien is hands down a contractor’s most effective tool to ensure they get paid for their work. Many types of restoration services are protected under lien laws in most states. But what happens to lien rights when a contractor accepts an assignment of benefits? 

An AOB generally won’t affect a contractor’s ability to file a mechanics lien on the property if they don’t receive payment. The homeowner is typically still responsible to pay for the improvements. This is especially true if the contract involves work that wasn’t covered by the insurance policy. 

However, make sure you know the laws in the state where your project is located. For example, Florida’s assignment of benefits law, perhaps the most restrictive in the country, appears to prohibit an AOB assignee from filing a lien. 

Florida AOB agreements are required to include language that waives the contractor’s rights to collect payment from the owner. The required statement takes it even further, stating that neither the contractor or any of their subs can file a mechanics lien on the owner’s property. 

On his website , Florida’s CFO says: “The third-party assignee and its subcontractors may not collect, or attempt to collect money from you, maintain any action of law against you, file a lien against your property or report you to a credit reporting agency.”

That sounds like a contractor assignee can’t file a lien if they aren’t paid . But, according to construction lawyer Alex Benarroche , it’s not so cut-and-dry.

“Florida’s AOB law has yet to be tested in court, and it’s possible that the no-lien provision would be invalid,” says Benarroche. “This is because Florida also prohibits no-lien clauses in a contract. It is not legal for a contractor to waive their right to file a lien via an agreement prior to performance.” 

Learn more about no-lien clauses and their enforceability state-by-state

Remember that every state treats AOBs differently, and conflicting laws can create additional risk. It’s important to consult with a construction lawyer in the project’s state before accepting an assignment of benefits. 

Best practices for contractors 

At the end of the day, there are advantages and disadvantages to accepting an assignment of benefits. While it’s possible in some circumstances that an AOB could help a contractor get paid faster, there are lots of other payment tools that are more effective and require less administrative costs. An AOB should never be the first option on the table . 

If you do decide to become an assignee to the property owner’s claim benefits, make sure you do your homework beforehand and adopt some best practices to effectively manage the assignment of benefits process. You’ll need to keep on top of the administrative details involved in drafting AOBs and schedule work in a timely manner to stay in compliance with the conditions of the agreement. 

Make sure you understand all the nuances of how insurance works when there’s a claim . You need to understand the owner’s policy and what it covers. Home insurance policy forms are basically standardized for easy comparisons in each state, so what you see with one company is what you get with all carriers. 

Since you’re now the point of contact for the insurance company, expect more phone calls and emails from both clients and the insurer . You’ll need to have a strategy to efficiently handle ramped-up communications since the frequency will increase. Keep homeowners and claims reps in the loop so you can build customer relationships and hopefully get paid faster by the insurer for your work.

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Assignment of Benefits: What It Is, and How It Can Affect your Property Insurance Claim

Table of Contents

What is an Assignment of Benefits?

In the context of insured property claims, an assignment of benefits (AOB) is an agreement between you and a contractor in which you give the contractor your right to insurance payments for a specific scope of work .  In exchange, the contractor agrees that it will not seek payment from you for that scope of work, except for the amount of any applicable deductible.  In other words, you give part of your insurance claim to your contractor, and your contractor agrees not to collect from you for part of its work.

The most important thing to know about an assignment of benefits is that it puts your contractor in control your claim , at least for their scope of work.  Losing that control can significantly affect the direction and outcome of your claim, so you should fully understand the implications of an AOB (sometimes called an assignment of claims or AOC) before signing one.

How Does an Assignment of Benefits Work in Practice? 

Let’s say you’re an insured homeowner, and Hurricane Ian significantly damaged your roof.  Let’s also assume your homeowner’s policy covers that damage.  A roofer, after inspecting your roof and reviewing your insurance policy, might conclude that your insurer is probably going to pay for a roof replacement under your insurance policy.  The only problem is that it’s early in the recovery process, and your insurer hasn’t yet stated whether it will pay for the roof replacement proposed by your contractor. So if you want your roof replaced now, you would ordinarily agree to pay your roofer for the replacement, and wait in hopes that your insurer reimburses you for the work.  This means that if your insurance company refuses to pay or drags out payment, you’re on the hook to your roofer for the cost of the replacement.

As an alternative to agreeing to pay your roofer for the full cost of the work, you could sign an assignment of benefits for the roof replacement.  In this scenario, your roofer owns the part of your insurance claim that pertains to the roof replacement.  You might have to pay your roofer for the amount of your deductible, but you probably don’t have to pay them for the rest of the cost of the work.  And if your insurance company refuses to pay or drags out payment for the roof replacement, it’s your roofer, and not you, who would be on the hook for that shortfall.

So should you sign an AOB?  Not necessarily.  Read below to understand the pros and cons of an assignment of benefits.

Are There any Downsides to Signing an Assignment of Benefits?

Yes.  

You lose control of your claim . This is the most important factor to understand when considering whether to sign an AOB.  An AOB is a formal assignment of your legal rights to payment under your insurance contract.  Unless you’re able to cancel the AOB, your contractor will have full control over your claim as it relates to their work. 

To explain why that control could matter, let’s go back to the roof replacement example.  When you signed the AOB, the scope of work you agreed on was to replace the roof.  But you’re not a roofing expert, so you don’t know whether the costs charged or the materials used by the roofer in its statement of work are industry appropriate or not.  In most cases, they probably are appropriate, and there’s no problem.  But if they’re not – if, for instance, the roofer’s prices are unreasonably high – then the insurer may not approve coverage for the replacement.  At that point, the roofer could lower its prices so the insurer approves the work, but it doesn’t have to, because it controls the claim .  Instead it could hold up work and threaten to sue your insurer unless it approves the work at the originally proposed price.  Now the entire project is insnared in litigation, leaving you in a tough spot with your insurer for your other claims and, most importantly, with an old leaky roof.

Misunderstanding the Scope of Work.   Another issue that can arise is that you don’t understand the scope of the assignment of benefits.  Contractor estimates and scopes of work are often highly technical documents that can be long on detail but short on clarity.  Contractors are experts at reading and writing them.  You are not.  That difference matters because the extent of your assignment of benefits is based on that technical, difficult-to-understand scope of work.  This can lead to situations where your understanding of what you’re authorizing the contractor to do is very different from what you’ve actually authorized in the AOB agreement.

In many cases, it’s not necessary .   Many contractors will work with you and your insurer to provide a detailed estimate of their work, and will not begin that work until your insurer has approved coverage for it.  This arrangement significantly reduces the risk of you being on the hook for uninsured repairs, without creating any of the potential problems that can occur when you give away your rights to your claim.

Do I have to sign an Assignment of Benefits?

No.  You are absolutely not required to sign an AOB if you do not want to. 

Are There any Benefits to Signing an Assignment of Benefits?

Potentially, but only if you’ve fully vetted your contractor and your claim involves complicated and technical construction issues that you don’t want to deal with. 

First, you must do your homework to fully vet your contractor!  Do not just take their word for it or be duped by slick ads.  Read reviews, understand their certificate of insurance, know where they’re located, and, if possible, ask for and talk to references.  If you’ve determined that the contractor is highly competent at the work they do, is fully insured, and has a good reputation with customers, then that reduces the risk that they’ll abuse their rights to your claim.

Second, if your claim involves complicated reconstruction issues, a reputable contractor may be well equipped to handle the claim and move it forward.  If you don’t want to deal with the hassle of handling a complicated claim like this, and you know you have a good contractor, one way to get rid of that hassle is an AOB.

Another way to get rid of the hassle is to try Claimly, the all-in-one claims handling tool that get you results but keeps you in control of your claim.  

Can my insurance policy restrict the use of AOBs?

Yes, it’s possible that your Florida insurance policy restricts the use of AOBs, but only if all of the following criteria are met:

• When you selected your coverage, your insurer offered you a different policy with the same coverage, only it did not restrict the right to sign an AOB.
• Your insurer made the restricted policy available at a lower cost than the unrestricted policy.
• If the policy completely prohibits AOBs, then it was made available at a lower cost than any policy partially prohibiting AOBs.
• The policy includes on its face the following notice in 18-point uppercase and boldfaced type:

THIS POLICY DOES NOT ALLOW THE UNRESTRICTED ASSIGNMENT OF POST-LOSS INSURANCE BENEFITS. BY SELECTING THIS POLICY, YOU WAIVE YOUR RIGHT TO FREELY ASSIGN OR TRANSFER THE POST-LOSS PROPERTY INSURANCE BENEFITS AVAILABLE UNDER THIS POLICY TO A THIRD PARTY OR TO OTHERWISE FREELY ENTER INTO AN ASSIGNMENT AGREEMENT AS THE TERM IS DEFINED IN SECTION 627.7153 OF THE FLORIDA STATUTES.

627.7153. 

Pro Tip : If you have an electronic copy of your complete insurance policy (not just the declaration page), then search for “policy does not allow the unrestricted assignment” or another phrase from the required language above to see if your policy restricts an AOB.  If your policy doesn’t contain this required language, it probably doesn’t restrict AOBs.

Do I have any rights or protections concerning Assignments of Benefits?

Yes, you do.  Florida recently enacted laws that protect consumers when dealing with an AOB.

Protections in the AOB Contract

To be enforceable, a Assignments of Benefits must meet all of the following requirements:

• Be in writing and executed by and between you and the contractor.
• Contain a provision that allows you to cancel the assignment agreement without a penalty or fee by submitting a written notice of cancellation signed by the you to the assignee:
• at least 30 days after the date work on the property is scheduled to commence if the assignee has not substantially performed, or
• at least 30 days after the execution of the agreement if the agreement does not contain a commencement date and the assignee has not begun substantial work on the property.
• Contain a provision requiring the assignee to provide a copy of the executed assignment agreement to the insurer within 3 business days after the date on which the assignment agreement is executed or the date on which work begins, whichever is earlier.
• Contain a written, itemized, per-unit cost estimate of the services to be performed by the assignee .
• Relate only to work to be performed by the assignee for services to protect, repair, restore, or replace a dwelling or structure or to mitigate against further damage to such property.
• Contain the following notice in 18-point uppercase and boldfaced type:

YOU ARE AGREEING TO GIVE UP CERTAIN RIGHTS YOU HAVE UNDER YOUR INSURANCE POLICY TO A THIRD PARTY, WHICH MAY RESULT IN LITIGATION AGAINST YOUR INSURER. PLEASE READ AND UNDERSTAND THIS DOCUMENT BEFORE SIGNING IT. YOU HAVE THE RIGHT TO CANCEL THIS AGREEMENT WITHOUT PENALTY WITHIN 14 DAYS AFTER THE DATE THIS AGREEMENT IS EXECUTED, AT LEAST 30 DAYS AFTER THE DATE WORK ON THE PROPERTY IS SCHEDULED TO COMMENCE IF THE ASSIGNEE HAS NOT SUBSTANTIALLY PERFORMED, OR AT LEAST 30 DAYS AFTER THE EXECUTION OF THE AGREEMENT IF THE AGREEMENT DOES NOT CONTAIN A COMMENCEMENT DATE AND THE ASSIGNEE HAS NOT BEGUN SUBSTANTIAL WORK ON THE PROPERTY. HOWEVER, YOU ARE OBLIGATED FOR PAYMENT OF ANY CONTRACTED WORK PERFORMED BEFORE THE AGREEMENT IS RESCINDED. THIS AGREEMENT DOES NOT CHANGE YOUR OBLIGATION TO PERFORM THE DUTIES REQUIRED UNDER YOUR PROPERTY INSURANCE POLICY.

• Contain a provision requiring the assignee to indemnify and hold harmless the assignor from all liabilities, damages, losses, and costs, including, but not limited to, attorney fees.

Contractor Duties

Under Florida law, a contractor (or anyone else) receiving rights to a claim under an AOB:

• Must provide you with accurate and up-to-date revised estimates of the scope of work to be performed as supplemental or additional repairs are required.
• Must perform the work in accordance with accepted industry standards.
• May not seek payment from you exceeding the applicable deductible under the policy unless asked the contractor to perform additional work at the your own expense.
• Must, as a condition precedent to filing suit under the policy, and, if required by the insurer, submit to examinations under oath and recorded statements conducted by the insurer or the insurer’s representative that are reasonably necessary, based on the scope of the work and the complexity of the claim, which examinations and recorded statements must be limited to matters related to the services provided, the cost of the services, and the assignment agreement.
• Must, as a condition precedent to filing suit under the policy, and, if required by the insurer, participate in appraisal or other alternative dispute resolution methods in accordance with the terms of the policy.
• If the contractor is making emergency repairs, the assignment of benefits cannot exceed the greater of $3,000 or 1% of your Coverage A limit.

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Consumer Insight

Sept. 13, 2023

Assignment of Benefits: Consumer Beware

You've just survived a severe storm, or a tornado and you've experienced some extensive damage to your home that requires repairs, including the roof. Your contractor is now asking for your permission to speak with your insurance company using an Assignment of Benefits. Before you sign, read the fine print. Otherwise, you may inadvertently sign over your benefits and any extra money you’re owed as part of your claim settlement.

The National Association of Insurance Commissioners (NAIC) offers information to help you better understand insurance, your risk and what to do in the event you need repairs after significant storm damage.

Be cautious about signing an Assignment of Benefits. An Assignment of Benefits, or an AOB, is an agreement signed by a policyholder that allows a third party—such as a water extraction company, a roofer or a plumber—to act on behalf of the insured and seek direct payment from the insurance company.  An AOB can be a useful tool for getting repairs done, as it allows the repair company to deal directly with your insurance company when negotiating repairs and issuing payment directly to the repair company. However, an AOB is a legal contract, so you need to understand what rights you are signing away and you need to be sure the repair company is trustworthy.

• With an Assignment of Benefits, the third party, like a roofing company or plumber, files your claim, makes the repair decision and collects insurance payments without your involvement.
• Once you have signed an AOB, the insurer only communicates with the third party and the other party can sue your insurer and you can lose your right to mediation.
• It's possible the third party may demand a higher claim payment than the insurer offers and then sue the insurer when it denies your claim.
• You are not required to sign an AOB to have repairs completed. You can file a claim directly with your insurance company, which allows you to maintain control of the rights and benefits provided by your policy in resolving the claim.

Be on alert for fraud. Home repair fraud is common after a natural disaster. Contractors often come into disaster-struck regions looking to make quick money by taking advantage of victims.

• It is a good idea to do business with local or trusted companies. Ask friends and family for references.
•  Your insurer may also have recommendations or a list of preferred contractors.
• Always get more than one bid on work projects. Your adjuster may want to review estimates before you make repairs.

Immediately after the disaster, have an accurate account of the damage for your insurance company when you file a claim.

• Before removing any debris or belongings, document all losses.
• Take photos or video and make a list of the damages and lost items.
• Save damaged items if possible so your insurer can inspect them, some insurance companies may have this as a requirement in their policy.

Most insurance companies have a time requirement for reporting a claim, so contact your agent or company as soon as possible. Your  state insurance department  can help you find contact information for your insurance company, if you cannot find it.

• Insurance company officials can help you determine what damages are covered, start your claim and even issue a check to start the recovery process.
• When reporting losses, you will need insurance information, current contact information and a  home inventory or list of damaged and lost property . If you do not have a list, the adjuster will give you some time to make one. Ask the adjuster how much time you have to submit this inventory list. The NAIC Post Disaster Claims Guide has details on what you can do if you do not have a home inventory list.

After you report damage to your insurance company, they will send a claims adjuster to assess the damage at no cost to you . An adjuster from your insurance company will walk through and around your home to inspect damaged items and temporary repairs you may have made.

• A public adjuster is different from an adjuster from your insurance company and has no ties to the insurance company.
• They estimate the damage to your home and property, review your insurance coverage, and negotiate a settlement of the insurance claim for you.
• Many states require public adjusters to be licensed. Some states prohibit public adjusters from negotiating insurance claims for you. In those states, only a licensed attorney can represent you.
• You have to pay a public adjuster.
• The NAIC Post Disaster Claims Guide has information on the different types of adjusters.

Once the adjuster has completed an assessment, they will provide documentation of the loss to your insurer to determine your claims settlement. When it comes to getting paid, you may receive more than one check. If the damage is severe or you are displaced from your home, the first check may be an emergency advance. Other payments may be for the contents of your home, other personal property, and structural damages. Please note that if there is a mortgage on your home, the payment for structural damage may be payable to you and your mortgage lender. Lenders may put that money into an escrow account and pay for repairs as the work is completed.

More information. States have rules governing how insurance companies handle claims. If you think that your insurer is not responding in a timely manner or completing a reasonable investigation of your claim, contact your  state insurance department .

About the National Association of Insurance Commissioners

As part of our state-based system of insurance regulation in the United States, the National Association of Insurance Commissioners (NAIC) provides expertise, data, and analysis for insurance commissioners to effectively regulate the industry and protect consumers. The U.S. standard-setting organization is governed by the chief insurance regulators from the 50 states, the District of Columbia and five U.S. territories. Through the NAIC, state insurance regulators establish standards and best practices, conduct peer reviews, and coordinate regulatory oversight. NAIC staff supports these efforts and represents the collective views of state regulators domestically and internationally.

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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.

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.

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What Is an Assignment of Benefits Form?

Our team is devoted to helping homeowners make the right coverage choices. We adhere to strict editorial guidelines to maintain the accuracy and relevance of our content. This article may feature our affiliate partners who provide us with compensation; however, our reviews remain independently formed. For further details, please refer to our editorial policy .

When the unthinkable occurs, it can leave you with a severely damaged home and a lot of work to organize and implement. This can translate to thousands of dollars, and all of that money typically comes from an insurance policy claim payout . When an assessment takes place, and work is set to start, a vendor may ask you to fill out an Assignment of Benefits (AOB) form, but what is it?

An Assignment of Benefits form, also known as an AOB, is a document that transfers the policyholder’s rights to a third-party such as a construction manager or contractor. Once the AOB is signed, the third party has the authority to file claims, collect payouts, and make repair decisions without involving the policyholder.

AOBs are not always required, but some contractors use them as a safety net to perform large quantities of work and secure payment. No contractor should push a homeowner to sign an AOB. Keep reading to learn more about AOBs and how they can help or harm a claim.

• Assignment of Benefits forms are used to provide a contractor or vendor with the full legal ability to handle an insurance claim, including payment, work done, and inspections.
• Some states allow policyholders to revoke AOB forms for certain legal causes.
• Once an AOB has been signed, the homeowner loses the ability to make any decisions on the open claim.
• After a claim is closed by the insurance agency, the policyholder gains back all rights to manage future claims.

Advantages of assignment of benefits forms

Sometimes it is hard to navigate insurance claims . It can be even more challenging when dealing with the emotions that come with the aftermath of a destructive event or accident. Assignment of Benefits Forms is a great tool when you are unable to oversee the claims process or are too overwhelmed to deal with repairs, contractors, and insurance queries.

An AOB allows the contractor to take over as the party who handles the claim. They make all the final decisions, and the owner loses a say in the claim overall. If the contractor or vendor is trustworthy and reputable, this can be convenient. If the contractor or vendor does not have a solid reputation, it can be a nightmare.

When making the decision to use an AOB instead of handling the claim yourself, ensure that it is the right fit for you and meets your needs. If it does, it could save you a lot of time, headache, and frustration overall.

Disadvantages of assignment of benefits forms

There is one large disadvantage of an Assignment of Benefits form. This is the fact that once a homeowner or policyholder signs the form, their rights as a policyholder are removed for that specific claim.

This means the policyholder no longer has any say in the work being done, the vendor selected, and how a claim is paid out or handled. The entire process is in the hands of the contractor, and that contractor can make all the final calls. 

If you are someone who likes to be hands-on during repairs and ensure contractors provide quality work before paying out, then this method may not be the right option for you.

Can an assignment of benefits be revoked?

Some states have laws in place that allow policyholders to revoke an assignment of benefits within a specific time frame. The revocation is only allowed under certain circumstances. Examples of these circumstances could be:

• The policyholder changes their mind within a certain time period
• The contractor or benefit assignee has not started substantial work after 30 days
• No commencement date is on the assignment of benefits, and substantial work has not begun

These revocation laws are in place to protect policyholders from contractors and vendors with poor business practices and alternative motives. This allows the policyholder to exit a contract without a penalty for breaching and terminating early.

How long is an assignment of benefits good for?

An Assignment of Benefits is good for the duration of a claim. This means that if it takes one year for a contractor to fix the item or dwelling listed in the claim, then the AOB will last for one year. If it takes less time, then the AOB is finished at the close of the claim.

Once the claim is closed by the insurance company , your rights as a policyholder for future claims are intact. This means if you prefer to handle a claim in the future on your own instead of using an AOB, you will be able to do so without penalty.

Avoiding AOB scams

It is extremely important to keep an eye out for scams when using an AOB. There are many unsavory characters in the world that will use this opportunity to take the rights of a homeowner and use them to their advantage and acquire more money for less quality. Some things to look out for when watching for such scams are:

• Don’t succumb to pressure . If the company is pressuring you to sign an AOB right out of the gate, find another company. This is a sign of bad business practice.
• Get estimates . Ensure that you shop around before selecting a contractor. Each company offers its own competitive pricing based on supplies, manpower, and resources. 
• Get referrals . Ask for referrals from the company or contractor before you sign anything. Also, go online and look up reviews from reputable review sites. This will give you an idea if the company is reputable.
• Read the fine print and get it all in writing . It is extremely important to read a contract in its entirety before committing to an AOB. Contracts are binding, and if there is something within a contract that you do not agree with, you have no way to change it later once an AOB is signed. 
• Talk to your insurer . Your insurance agency deals with vendors and contractors on a daily basis. They know the ins and outs of good practices and can often help recommend reputable vendors to guide you through the process.

Going into an AOB blind can result in an exam that costs you thousands of dollars. Be diligent and research your options before entering into any agreement.

Go with your gut

When deciding whether or not to select an AOB to handle a claim, it is often best to go with your gut. If you know a reputable company that has a good history handling similar projects and claims, they may be a great option to reduce stress. On the flip side, if you prefer to be part of the process and have more control, skipping an AOB may be right for you.

Also read: What to do with money leftover from an insurance claim?

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Homeowners Insurance Florida – Assignment of Benefits (AOB)

To many homeowners the clauses buried deeply in their insurance policies are overlooked. They contain lots of apparent legal mumbo-jumbo with probably no real impact on one’s coverage until disaster strikes. If you insure property in Florida you may want to study more closely a clause that can cause you severe problems and is greatly responsible for raising your premiums. This clause is Assignment of Benefits, “AOB”.

What is an Assignment of Benefits (AOB)?

From the website of the Florida Insurance Regulator we have an explanation:

An Assignment of Benefits, or an AOB, is a document signed by a policyholder that allows a third party, such as a water extraction company, a roofer, or a plumber, to “stand in the shoes” of the insured and seek direct payment from the insurance company.

AOBs have been a part of Florida’s marketplace for more than a 100 years. Loopholes in the way it is being used in the marketplace are driving up costs for homeowners across the state due to unnecessary litigation associated with certain AOB claims. According to the Department of Financial Services, there were 405 AOB lawsuits across all 67 Florida counties in 2006, and that number had risen to 28,200 by 2016.

What Is The Purpose of Assignment of Benefits?

This clause is designed to appear to relieve the homeowner of the hassles of settling claims after they have been paid what they are owed from a loss. In fact, it is an agreement that, once signed, transfers the insurance claims rights or benefits  of the policy to a third party. An AOB gives the third party authority to file a claim, make repair decisions and collect insurance payments without the involvement of the homeowner.

How Does Assignment of Benefits Work?

For example, you as a homeowner have a claim from a storm, say for $10,000 of repairs. An attorney or contractor doing home repairs, approaches you, offers to pay the claim in full and, with your permission, settle with the insurance company. Perfect, you think.  You may be presented with a document to sign so that repairs may proceed. It may well contain AOB language. Read it carefully.

The attorney/contractor then sues the insurer for $1,000,000 citing all types of shortcomings, deficiencies and skull duggery in the claim settlement.

Assignment of Benefits Florida Homeowners Insurance

This action is occurring so often in Florida that premiums have been raised and the legislature has been pummeled by insurers and homeowner groups to make changes to the law. To no avail, so far.

At a recent panel discussion put on by Demotech, the question was asked, “What if the legislature was giving a small set of trial lawyers $1 billion a year. And what if you and every one of the six million property homeowners in Florida had to write a $400 check each year to contractors and their lawyers?  That’s a different way of looking at this issue.  But that’s what’s happened.”

An insurer in Florida, known as the insurer of last resort as it is owned by the state and is intended to insure homeowners who cannot obtain coverage from any other insurer, Citizens Property Insurance Corporation, has declared that it is receiving over 350 claims each month for AOB claims from non-homeowners.

If you want to learn more, you can read our Florida Homeowners Insurance State Guide to find affordable homeowners insurance in Florida.

Florida Assignment of Benefits Legislation

The legislature has been unresponsive, even from efforts within the government. The Office of Insurance Regulation crafted and submitted a bill this year to clarify that only the homeowner claimant would be entitled to file a suit. It, and similar reform measures, failed to pass. This clause appears in many other states also, but Florida is the leader, far and away, in its use by third parties to move you as claimant out of their way to proceed.

What Should You Do In Event of A Claim?

Read your policy. Even if not completely understandable, it will give to you a good start. Contact your insurance company or agent. Don’t sign any AOB with blank spaces. Don’t feel obligated to sign it. Your claim will be satisfactorily adjusted in all likelihood. If you need any homeowners insurance, check our free home insurance quote services .

But be aware: if you sign this agreement and there is a dispute among the other parties with litigation resulting, you may well be brought in to it. If the insurer or the contractor/attorney are not satisfied with monies received you may be seen as responsible for the additional payments and a lien placed upon your property.

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Assignment of Claim after a Loss: What Homeowners Should Know

Let’s start with the basics. If you, as a homeowner, sustain property damage or losses because of a covered event (like a fire, for example), you will need your home repaired. You choose a contractor or restoration company to do the work – but the check from the insurance company has not come through yet, and you need them to start right away. So, what can you do?

You can sign an “assignment of claim,” which assigns your rights (as the policyholder) to benefits and proceeds from the loss, to the company or contractors. In the simplest of terms, the assignment of claim allows your contractor to get paid directly from the insurance company.

What is the anti-transfer clause in insurance?

However, many contractors and purchasers of the damaged property have found themselves in a tight spot over the years, because of something called the anti-transfer clause. As explained on the Tennessee Insurance Litigation Blog ,  the anti-transfer clause usually reads something like this: “Your rights and duties under this policy may not be transferred without our written consent except in the case of death of an individual named insured.” Sometimes, the insurance company requires written consent before an assignment of claim can be made.

This clause routinely allows insurers to deny payments to contractors – but it shouldn’t, when an assignment of claim is made post-loss.

What’s the difference between pre-loss vs. post-loss assignments?

The Courts of Tennessee have routinely ruled on behalf of contractors and purchasers who were assigned the claim after the loss occurred. That is because the original assignee – the homeowner – was approved by the insurance company in the first place, and because the damage occurred regardless. There was no additional risk for the insurance company. Therefore, even if the contractor has a long and storied history of rule-breaking (or even criminal activity), the homeowner can assign the claim however he or she chooses; after all, the loss already happened.

Where insurance companies can (and do) have a leg up is for pre-loss assignments. The insurance company underwrote the risk on Bob and Jane Homeowner because it felt confident enough to do so. Bob and Jane cannot assign their policy to another person without the approval of the insurer, even when no loss has occurred.

Even if there is an anti-transfer clause in your policy, the chances are very good that a post-loss assignment cannot be legally denied by your insurer. If it is, seek out an experienced insurance dispute lawyer to help you argue the denial.

One last note for Tennessee policyholders

In some cases, the insurance company may decide that the amount of your loss is worth less than the cost of the renovations for which the contractor is charging. If this happens, you could be on the hook for the remainder of the costs, depending, of course, on the language of the deal with your contractor.

Because of this risk, it’s wise to contact an attorney before making any decisions. Get informed about your rights from the start, and let your lawyer address any potential hiccups along the way. If your insurer lowballs your claim, your attorney can  handle the dispute , to ensure that you are compensated fairly.

At McWherter Scott & Bobbitt, we have spent years fighting against unfair insurance claims policies in Tennessee and Mississippi. Let  Brandon McWherter ,  Jonathan Bobbitt  and  Clint Scott   put their knowledge and experience to work for you. Please call  731-664-1340 or fill out our  contact form . We maintain offices in Nashville, Chattanooga, Memphis, Jackson and Knoxville.

Brandon McWherter has dedicated his practice to assisting insurance policyholders with their claims against insurance companies, including claims for bad faith. He is licensed in Tennessee, Arkansas, and Mississippi. Learn More

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Assignment of benefits: what you need to know.

• August 17, 2022
• Steven Schwartzapfel

Insurance can be useful, but dealing with the back-and-forth between insurance companies and contractors, medical specialists, and others can be a time-consuming and ultimately unpleasant experience. You want your medical bills to be paid without having to act as a middleman between your healthcare provider and your insurer.

However, there’s a way you can streamline this process. With an assignment of benefits, you can designate your healthcare provider or any other insurance payout recipient as the go-to party for insurance claims. While this can be convenient, there are certain risks to keep in mind as well.

Below, we’ll explore what an assignment of insurance benefits is (as well as other forms of remediation), how it works, and when you should employ it. For more information, or to learn whether you may have a claim against an insurer, contact Schwartzapfel Lawyers now at 1-516-342-2200 .

What Is an Assignment of Benefits?

An assignment of benefits (AOB) is a legal process through which an insured individual or party signs paperwork that designates another party like a contractor, company, or healthcare provider as their insurance claimant .

Suppose you’re injured in a car accident and need to file a claim with your health insurance company for medical bills and related costs. However, you also need plenty of time to recover. The thought of constantly negotiating between your insurance company, your healthcare provider, and anyone else seems draining and unwelcome.

With an assignment of benefits, you can designate your healthcare provider as your insurance claimant. Then, your healthcare provider can request insurance payouts from your healthcare insurance provider directly.

Through this system, the health insurance provider directly pays your physician or hospital rather than paying you. This means you don’t have to pay your healthcare provider. It’s a streamlined, straightforward way to make sure insurance money gets where it needs to go. It also saves you time and prevents you from having to think about insurance payments unless absolutely necessary.

What Does an Assignment of Benefits Mean?

An AOB means that you designate another party as your insurance claimant. In the above example, that’s your healthcare provider, which could be a physician, hospital, or other organization.

With the assignment of insurance coverage, that healthcare provider can then make a claim for insurance payments directly to your insurance company. The insurance company then pays your healthcare provider directly, and you’re removed as the middleman.

As a bonus, this system sometimes cuts down on your overall costs by eliminating certain service fees. Since there’s only one transaction — the transaction between your healthcare provider and your health insurer — there’s only one set of service fees to contend with. You don’t have to deal with two sets of service fees from first receiving money from your insurance provider, then sending that money to your healthcare provider.

Ultimately, the point of an assignment of benefits is to make things easier for you, your insurer, and anyone else involved in the process.

What Types of Insurance Qualify for an Assignment of Benefits?

Most types of commonly held insurance can work with an assignment of benefits. These insurance types include car insurance, healthcare insurance, homeowners insurance, property insurance, and more.

Note that not all insurance companies allow you to use an assignment of benefits. For an assignment of benefits to work, the potential insurance claimant and the insurance company in question must each sign the paperwork and agree to the arrangement. This prevents fraud (to some extent) and ensures that every party goes into the arrangement with clear expectations.

If your insurance company does not accept assignments of benefits, you’ll have to take care of insurance payments the traditional way. There are many reasons why an insurance company may not accept an assignment of benefits.

To speak with a Schwartzapfel Lawyers expert about this directly, call 1-516-342-2200 for a free consultation today. It will be our privilege to assist you with all your legal questions, needs, and recovery efforts.

Who Uses Assignments of Benefits?

Many providers, services, and contractors use assignments of benefits. It’s often in their interests to accept an assignment of benefits since they can get paid for their work more quickly and make critical decisions without having to consult the insurance policyholder first.

Imagine a circumstance in which a homeowner wants a contractor to add a new room to their property. The contractor knows that the scale of the project could increase or shrink depending on the specifics of the job, the weather, and other factors.

If the homeowner uses an assignment of benefits to give the contractor rights to make insurance claims for the project, that contractor can then:

• Bill the insurer directly for their work. This is beneficial since it ensures that the contractor’s employees get paid promptly and they can purchase the supplies they need.
• Make important decisions to ensure that the project completes on time. For example, a contract can authorize another insurance claim for extra supplies without consulting with the homeowner beforehand, saving time and potentially money in the process.

Practically any company or organization that receives payments from insurance companies may choose to take advantage of an assignment of benefits with you. Example companies and providers include:

• Ambulance services
• Drug and biological companies
• Lab diagnostic services
• Hospitals and medical centers like clinics
• Certified medical professionals such as nurse anesthetists, nurse midwives, clinical psychologists, and others
• Ambulatory surgical center services
• Permanent repair and improvement contractors like carpenters, plumbers, roofers, restoration companies, and others
• Auto repair shops and mechanic organizations

Advantages of Using an Assignment of Benefits

An assignment of benefits can be an advantageous contract to employ, especially if you believe that you’ll need to pay a contractor, healthcare provider, and/or other organization via insurance payouts regularly for the near future.

These benefits include but are not limited to:

• Save time for yourself. Again, imagine a circumstance in which you are hospitalized and have to pay your healthcare provider through your health insurance payouts. If you use an assignment of benefits, you don’t have to make the payments personally or oversee the insurance payouts. Instead, you can focus on resting and recovering.
• Possibly save yourself money in the long run. As noted above, an assignment of benefits can help you circumvent some service fees by limiting the number of transactions or money transfers required to ensure everyone is paid on time.
• Increased peace of mind. Many people don’t like having to constantly think about insurance payouts, contacting their insurance company, or negotiating between insurers and contractors/providers. With an assignment of benefits, you can let your insurance company and a contractor or provider work things out between them, though this can lead to applications later down the road.

Because of these benefits, many recovering individuals, car accident victims, homeowners, and others utilize AOB agreements from time to time.

Risks of Using an Assignment of Benefits

Worth mentioning, too, is that an assignment of benefits does carry certain risks you should be aware of before presenting this contract to your insurance company or a contractor or provider. Remember, an assignment of benefits is a legally binding contract unless it is otherwise dissolved (which is technically possible).

The risks of using an assignment of benefits include:

• You give billing control to your healthcare provider, contractor, or another party. This allows them to bill your insurance company for charges that you might not find necessary. For example, a home improvement contractor might bill a homeowner’s insurance company for an unnecessary material or improvement. The homeowner only finds out after the fact and after all the money has been paid, resulting in a higher premium for their insurance policy or more fees than they expected.
• You allow a contractor or service provider to sue your insurance company if the insurer does not want to pay for a certain service or bill. This can happen if the insurance company and contractor or service provider disagree on one or another billable item. Then, you may be dragged into litigation or arbitration you did not agree to in the first place.
• You may lose track of what your insurance company pays for various services . As such, you could be surprised if your health insurance or other insurance premiums and deductibles increase suddenly.

Given these disadvantages, it’s still wise to keep track of insurance payments even if you choose to use an assignment of benefits. For example, you might request that your insurance company keep you up to date on all billable items a contractor or service provider charges for the duration of your treatment or project.

For more on this and related topic, call Schwartzapfel Lawyers now at 1-516-342-2200 .

How To Make Sure an Assignment of Benefits Is Safe

Even though AOBs do carry potential disadvantages, there are ways to make sure that your chosen contract is safe and legally airtight. First, it’s generally a wise idea to contact knowledgeable legal representatives so they can look over your paperwork and ensure that any given assignment of benefits doesn’t contain any loopholes that could be exploited by a service provider or contractor.

The right lawyer can also make sure that an assignment of benefits is legally binding for your insurance provider. To make sure an assignment of benefits is safe, you should perform the following steps:

• Always check for reviews and references before hiring a contractor or service provider, especially if you plan to use an AOB ahead of time. For example, you should stay away if a contractor has a reputation for abusing insurance claims.
• Always get several estimates for work, repairs, or bills. Then, you can compare the estimated bills and see whether one contractor or service provider is likely to be honest about their charges.
• Get all estimates, payment schedules, and project schedules in writing so you can refer back to them later on.
• Don’t let a service provider or contractor pressure you into hiring them for any reason . If they seem overly excited about getting started, they could be trying to rush things along or get you to sign an AOB so that they can start issuing charges to your insurance company.
• Read your assignment of benefits contract fully. Make sure that there aren’t any legal loopholes that a contractor or service provider can take advantage of. An experienced lawyer can help you draft and sign a beneficial AOB contract.

Can You Sue a Party for Abusing an Assignment of Benefits?

Sometimes. If you believe your assignment of benefits is being abused by a contractor or service provider, you may be able to sue them for breaching your contract or even AOB fraud. However, successfully suing for insurance fraud of any kind is often difficult.

Also, you should remember that a contractor or service provider can sue your insurance company if the insurance carrier decides not to pay them. For example, if your insurer decides that a service provider is engaging in billing scams and no longer wishes to make payouts, this could put you in legal hot water.

If you’re not sure whether you have grounds for a lawsuit, contact Schwartzapfel Lawyers today at 1-516-342-2200 . At no charge, we’ll examine the details of your case and provide you with a consultation. Don’t wait. Call now!

Assignment of Benefits FAQs

Which states allow assignments of benefits.

Every state allows you to offer an assignment of benefits to a contractor and/or insurance company. That means, whether you live in New York, Florida, Arizona, California, or some other state, you can rest assured that AOBs are viable tools to streamline the insurance payout process.

Can You Revoke an Assignment of Benefits?

Yes. There may come a time when you need to revoke an assignment of benefits. This may be because you no longer want the provider or contractor to have control over your insurance claims, or because you want to switch providers/contractors.

To revoke an assignment of benefits agreement, you must notify the assignee (i.e., the new insurance claimant). A legally solid assignment of benefits contract should also include terms and rules for this decision. Once more, it’s usually a wise idea to have an experienced lawyer look over an assignment of benefits contract to make sure you don’t miss these by accident.

Contact Schwartzapfel Lawyers Today

An assignment of benefits is an invaluable tool when you need to streamline the insurance claims process. For example, you can designate your healthcare provider as your primary claimant with an assignment of benefits, allowing them to charge your insurance company directly for healthcare costs.

However, there are also risks associated with an assignment of benefits. If you believe a contractor or healthcare provider is charging your insurance company unfairly, you may need legal representatives. Schwartzapfel Lawyers can help.

As knowledgeable New York attorneys who are well-versed in New York insurance law, we’re ready to assist with any and all litigation needs. For a free case evaluation and consultation, contact Schwartzapfel Lawyers today at 1-516-342-2200 !

Schwartzapfel Lawyers, P.C. | Fighting For You™™

What Is an Insurance Claim? | Experian

What is assignment of benefits, and how does it impact insurers? | Insurance Business Mag

Florida Insurance Ruling Sets Precedent for Assignment of Benefits | Law.com

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How to spot an AOB homeowner’s insurance scam

Tue Dec 03 2019

For Florida homeowners, a roof leak or other home insurance claim might just be the start of their troubles. Some contractors may take advantage of what’s called an assignment of benefits (AOB) agreement and leave homeowners in the lurch.

Thankfully, Florida passed a bill in 2019 aimed to curb the abuse of assignment of benefits. Then the state passed two additional bills in two different special sessions in 2022. The first removed the ability to get attorney fees for AOB vendors ; the second completely prohibited AOBs .

Louisiana also passed its own bill prohibiting AOBs in 2023 . 

While these bills help protect homeowners, you still need to understand the potential pitfalls of signing over your claim benefits to another party. Let’s look at what AOB abuse is so you don’t get taken for a ride.

What is an assignment of benefits?

An assignment of benefits is an agreement that transfers your insurance claims rights to another party. When you sign an AOB form, you give someone else the authority to:

File an insurance claim.

Make decisions about repairs.

Collect insurance payments.

File a lawsuit against your insurance company regarding your claim.

Homeowners who are dealing with major damage may assign their benefits to the business making the repairs because they believe it has more experience working with an insurance company to settle a claim. They may believe the business can help them better navigate the claims process . 

But in actuality, these vendors are not licensed to assist with the claims process and there is no need for an assignment of benefits.

How can assignment of benefits be abused?

A disreputable business can easily abuse an assignment of benefits. Once you sign this agreement, you give up your rights as the policyholder. This may mean:

Your insurance company will only communicate with the vendor regarding that portion of your claim.

You lose all rights regarding that portion of your claim.

You lose the right to mediate that portion of your claim.

You may have to pay penalties if you don’t comply with the AOB.

The other party can sue your insurance company.

Dishonest contractors take advantage of this situation by padding the bill and hiring an attorney to sue the insurance company when it does not pay the bill in full or denies the claim. 

Some found the system so lucrative that they paid plumbers up to $2,500 for every homeowner who signs an AOB . Lawsuits filed by contractors who have been assigned benefits by their clients were on the rise, according to the Tampa Bay Times – AOB claims in Florida jumped from 405 in 2006 to 28,000 in 2016 .

Florida’s and Louisiana’s legislature actions on AOB lawsuits should help prevent these opportunistic practices. Florida insurance regulators have also taken steps to share information and resources about AOBs and AOB scams .

How assignment of benefits abuse hurts homeowners

Assignment of benefits abuse, like all insurance fraud, can hurt policyholders. The abundance of AOB lawsuits against insurance companies drove up home insurance premiums to offset losses – in fact, this type of litigation is one of the reasons that home insurance costs in Florida have risen considerably in recent years. The hope is that the legislation to reform AOB practices will help bring those costs down over time.

Plus, most AOB agreements allow the contractor to collect their fees from the policyholder if the insurance policy doesn’t cover the damage or the insurance provider won’t pay the full amount demanded. If the AOB vendor tries to collect from you and you can’t pay, they can place a lien on your property for the amount owed.

How homeowners can avoid assignment of benefits abuse

To avoid unscrupulous vendors, watch out for these red flags:

Someone knocks on your door and tells you there is damage you didn’t know about or offers a free inspection to see if there is any damage.

A contractor promises something for nothing or for just the cost of your deductible, such as a free roof or kitchen renovation.

Someone claims the damage is greater than it clearly is.

Repairs begin before your insurance company is notified or allowed to inspect damages.

The form looks unprofessional or has misspellings and poor grammar.

Forms have any blank spaces to be filled in later, after you’ve signed.

You can also avoid an assignment of benefit scam by doing the things you would normally do before signing a contract:

Ask questions. A reputable business owner is willing to answer any question you ask.

Read the forms. Make sure you understand what benefits you’re signing away.

Check your policy documents. AOBs may not be permissible for your policy, so be sure to check before you sign.

Know your rights. You never need an AOB to get your claim processed or the repairs started.

Contact your carrier. Before executing any AOB, repair, or mitigation agreement, check with your insurance carrier or agent to first report the damage and then get their opinion on the validity of the agreement.

It’s not a small thing to sign away the rights to your insurance benefits. Assignment of benefits are only truly needed when you go to your doctor.

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