The following is an insurance claim question we answered for a policyholder through the United Policyholders Ask an Expert Forum.

Q. I live in the path of Irma in Florida and suffered damage to my property. Since the storm and never before, there has been tons of articles in the news, social media and TV commercials playing here in Florida warning consumers about signing Assignment of Benefits agreements with contractors because you'll get ripped off and make a mistake. I have a contractor that I've used before and known for years that says it's been an accepted practice for decades for emergency services. Are the insurance companies just trying to save money? Please explain detail because it seems like a big coordinated PR push from numerous insurance companies saying basically the exact same thing. Thank you for your help!!

A. Your contractor is correct that Assignment of Benefits (AOB) clauses have been around for a long time. However it has only been over the last five years or so that this process to ensure payment for services has been abused in ways it was not intended to be used. As an example, when you receive medical services you will likely sign an assignment of benefits form which then will be submitted to  your medical insurer. Also, contractors in some circumstances have used it in a honest and ethical manner to ensure they will get paid.

So what happed? Well, in my and others opinions, when the hurricane work dried up in Florida given the long 10 year drought, contractors and some law firms discovered that by using an AOB form, billing for work that may not have been required or was way over the top in terms of scope and cost could ensure payment because of one-way attorney fees. As an example, in Florida if you sue your insurance company and get one dollar more than was originally offered, your attorney can make a claim for their fees. So with nothing to lose contractors and some law firms are having a field day. A lot of in-depth reporting has been done on this abuse and we have written extensively about the AOB Controversy from a Public Adjusters Perspective, but it’s all about gaming the system and a grab for money without any risk for the some contractors and their lawyers.

So once you sign this form you have assigned all of your policy benefits over to a contractor who is then free to make a claim for what many are saying is unnecessary work, padded pricing or in some  cases fraud . If the contractor is not paid by your insurance company, the contractor turns it over to their attorney who then sues the insurance company. In some cases, if the insurance company does not pay, they can come back after the homeowner. Not hard to see how this news spread and now its game on. So who pays? You the consumer, through higher insurance rates and reduction in coverages. There was and still is a simpler means to ensure that an emergency service contractor gets paid and that is through a "Direction to Pay Authorization" form. Whatever you sign, make sure it is with the expressed written permission of your insurance company for a specific cost.

The cry to reform AOB in Florida is not likely to abate anytime soon given Hurricane Irma claims.  The Florida legislature has for the past two years tried to fix the AOB problem but lobbyists for the contractors and trial lawyers have thus far prevailed. In my opinion, policyholders should avoid having a third party take over their property insurance policy. Think before you sign, read the fine print and ask questions. 

If you have questions regarding any property insurance related issue caused by Hurricane Irma please call 800-321-4488 or contact a licensed Florida Public Adjuster to submit a question to one of our insurance claim experts.