A relatively unknown problem among the general public has received a burst of media attention in the past few days. Assignment of Benefits (AOB) abuse has been highlighted in articles by the Palm Beach Post, Sun-Sentinel, numerous other newspapers and online publications. While this issue is not on the top of the everyday Floridian's mind, the Realtors® Association of the Palm Beaches has been keeping an eye on the issue since it first came to light. This post will dive into the problem and possible solutions to curb AOB abuse.
What is an Assignment of Benefits?
Let's use an common example: A pipe suddenly ruptures and floods the first floor of your house. You call a water damage restoration company to come clean up the mess. In order to expedite the insurance claims process, the company asks you to sign a document that signs over the homeowner’s right to seek reimbursement directly from their insurance company. This document is called the Assignment of Benefits (AOB). After signing that paper, the company will handle the insurance claim and you get the water damaged fixed quickly. Sounds like a good deal, right?
It seems like the water damage company is doing you a huge favor by dealing with the insurance company. In most cases, the company cleans up the damage and bills the insurance company for the work done. Unfortunately that is not always the case.
What's wrong with letting someone else handle my insurance claim?
As stated before, the majority of companies will bill the insurance company for the actual cost of the cleanup. However, there are bad actors that will abuse this system for their own profit. These bad actors (water damage companies) and their attorneys, equipped with the “Assignment of Benefits” signed over in their name, will invoice the insurance companies for exorbitant amount of money for simple claims. Then if the insurance company denies their claim or offers to pay less than the invoiced amount, their attorney will file a lawsuit.
According to an article in the Sun-Sentinel, from January to October this year Florida’s state-run, Citizens Property Insurance, saw a 30-percent increase in water damage related lawsuits over the same time period in 2015. That’s 8,097 new lawsuits that might result in a $100 million loss for Citizens this year. A consequence of the increase in non-storm water claims could mean the average Citizens Property Insurance multi-peril homeowner policy that costed an average of $367 in 2011 would jump to an average of $2,083 in 2017.
For the past several years Citizens Property Insurance’s goal has been to reduce, or depopulate, its customer pool from a record high 1.5 million customers in 2012. It has done this by transferring customers to a variety of different private insurance companies. Since the proliferation of non-storm water damage related claims in recent years, private insurers have grown wary of taking on Citizens customers. As the President and CEO of Citizens Barry Gilway put it blatantly, “There’s very little interest in depopulation”. As a result of this wariness from private insurance companies, Citizens personal-line accounts could grow by almost 50,000 customers in 2017 according to the News Service of Florida.
Who can help with this problem?
At a Board of Directors meeting on Wednesday, Citizens presented its 2017 legislative “wish list” with issues ranging from the payment of attorney’s fees by insurers to the ability for a consumer to rescind an AOB agreement. It will be ultimately up to the Florida Legislature to act on these requests from Citizens to curb the excessive abuse of Assignment of Benefits.
With guidance from Florida Realtors®, local Realtor® Associations inform Florida Legislative candidates during the candidate screening process of the Assignment of Benefits abuse issue. During Great American Realtor® Days at the state Capitol in late March 2017, Realtors® will continue to educate and bring awareness to this problem in meetings with their elected officials.