What is an Assignment of Benefits (AOB)?
Assignment of Benefits (AOB) is a legal agreement where a policyholder transfers their insurance rights to a third-party contractor or service provider. This arrangement is common in property insurance claims. For example, a policyholder assigns a contractor the right to receive payment and carry out repairs directly with the insurer.
Why Were the New AOB Laws Introduced?
Florida’s Legislature passed House Bill 7065 in May 2019, with the laws taking effect in July 2019. These laws were introduced in response to widespread abuse of the AOB process by dishonest contractors, mainly in home repair. Insurance companies reported many inflated and fraudulent claims. Consequently, to avoid costly litigation, insurers often settled these claims, which drove up costs significantly.
What Do the New AOB Laws Include?
The new laws specifically target fraud and abuse in the AOB process. As a result, they aim to lower insurance premiums and reduce costs for both homeowners and insurers. Some key changes include:
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Disclosure Requirements: Firstly, contractors must provide a clear statement outlining the work scope and estimated costs. In addition, they must inform homeowners that they can cancel the contract within three business days without penalty.
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Timelines: Moreover, contractors must notify the homeowner’s insurer of claims within 10 business days after starting work. This helps to speed up the claims process and reduces repair delays.
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Limits on Litigation Fees: Furthermore, the laws cap the fees contractors can charge for legal disputes, thereby lowering costs for homeowners and insurers.
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Refunds for Overcharges: Lastly, contractors are required to refund any improper or inflated billing, addressing issues of unjust enrichment.
What is the Potential Impact of the New AOB Laws?
These laws affect homeowners and service providers differently:
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Homeowners and Insurers: On one hand, they may benefit from lower costs due to fewer lawsuits, faster repairs, and clearer pricing transparency.
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Service Providers: On the other hand, some contractors could see less business. Specifically, homeowners may hesitate to sign AOB contracts, and contractors face limits on charging inflated fees.
Conclusion
In conclusion, Florida’s new AOB laws aim to curb fraud and reduce excessive insurance costs. They attempt to balance homeowner protections, contractor rights, and insurer interests. While the full impact remains to be seen, all parties should carefully monitor how these changes unfold.