Learning more about “assignment of benefit” requests
The Office of the Insurance Commissioner’s Consumer Advocacy Program has fielded several questions recently about contractors requesting an “assignment of benefits.” This is a form that, once completed, turns over the consumer or policyholder’s rights as an insurance claimant to the contractor.
That allows the contractor to negotiate, make decisions, and settle claims with the insurance company directly. For example: If your home was damaged in a windstorm and you hired a construction company to do the repair work, you could sign an AOB and the contractor would be able to negotiate the claim directly with the insurance company.
The National Association of Insurance Commissioners, however, recommends caution when entering into an AOB, as it is a legal contract:
- 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.
- The third party could demand a higher claim payment than the insurer offers and 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.
Insurance News Net wrote about how AOBs has been a hot topic in Florida, where changes to property insurance laws brought a constitutional challenge from a construction firm:
Insurers have long blamed litigation and attorney fees for driving up costs. The new law took a series of steps to try to address those issues, but the constitutional challenge focuses on part of the measure that deals with what is known as “assignment of benefits.”
The change, however, prevents contractors from recovering prevailing party fees — meaning the unsuccessful party in the lawsuit pays attorney fees for the successful party — which was intended to reduce the amount of insurance lawsuits. Florida accounts for 79% of all homeowners’ insurance lawsuits nationally, according to the state’s insurance regulator, despite having just 9% of all claims.
The Florida Insurance Regulator has its own page on AOBs, and offers its own set of precautionary measures when dealing with them:
- Read your insurance policy carefully.
- Know what your responsibilities are after a loss.
- Know whether your insurance policy restricts your ability to assign your benefits and the terms of any restrictions.
- Know whether your insurer partners with any repair companies.
- Contact your insurance company prior to signing the AOB.
- Read the AOB carefully, ask questions, and do not feel pressured to sign it.
- Do not sign if there are blank spaces contained in the document.
Consumers can file a complaint against an insurance company through the OIC if an insurer wrongly handles their assignment of benefits.
