Assignment of Benefits (AOB) refers to a legal arrangement wherein a policyholder transfers their insurance rights and benefits to a third-party contractor or service provider. It is commonly used in the context of property insurance claims, where the policyholder assigns the right to receive payment and perform repairs to a service provider who has initiated the work. The Assignment of Benefits law is an important part of the insurance landscape in Florida, but it has also been a topic of controversy in recent years. This blog will discuss the new AOB laws in Florida, including what they entail, why they were introduced, and their potential impact on policyholders and service providers.
What is an Assignment of Benefits (AOB)? As mentioned earlier, AOB refers to an agreement where a policyholder gives a third-party contractor the right to deal directly with their insurance provider. Under an AOB agreement, the contractor – a water damage restoration company, for example – would be placed in a position where they can bill the insurance provider directly and receive payment directly, rather than going through the policyholder.
Why were the new AOB laws introduced? The Florida Legislature enacted House Bill 7065 in May 2019, with the new AOB laws taking effect in July 2019. These laws were introduced because of widespread abuse of the AOB process by unscrupulous contractors, primarily within the home repair industry. Insurance carriers have highlighted that they often receive claims that are inflated and significantly overpriced owing to fraudulent claims and billing. As a result, insurance companies were forced to settle AOB claims or face both the risk of litigation and the significant costs of defending themselves.
What do the new AOB laws entail? The new AOB laws in Florida aim to reduce fraudulent claims that have become a pervasive problem within the state. The new legislation was enacted to address abuse of the AOB process, which has led to increased premiums for homeowners and an estimated $6.4 billion in additional costs for insurance carriers. The new laws make several changes to the state’s insurance laws and are intended to protect both homeowners and insurance providers. Some of the changes that have occurred as a result of the new AOB laws in Florida include:
- Disclosure Requirements. Under the new laws, contractors must provide a statement that clearly outlines the scope of work to be done and the estimated costs associated with the work. The contractor must also provide a statement advising the homeowner that they have the right to rescind the contract at any time without penalty within three business days of signing the agreement.
- Timelines. The new laws set specific timelines for repairs, with contractors required to notify homeowners’ insurance providers of claims within 10 business days of starting work. The timeline aims to speed up the claims process, with the goal of reducing costs associated with delayed repairs.
- Litigation Proceedings. The new laws also limit the amount that contractors can charge for fees associated with litigation. This is designed to reduce the costs that homeowners and insurance providers incur for disputes that arise from fraudulent claims.
- Unjust Enrichment. The new AOB laws also aim to address the issue of unjust enrichment. Under these laws, contractors are required to refund any overcharges or improper billing that they have charged for services rendered.
What is the potential impact of the new AOB laws? The new AOB laws have the potential to impact both homeowners and service providers in different ways. The positive impacts of the new laws include reduced costs for homeowners and insurance providers resulting from reduced litigation, timeframes that encourage faster repairs, and improved transparency around the cost of repairs.
For service providers, the new AOB laws may lead to a reduction in business, as homeowners may be reluctant to enter into agreements with providers who require AOB contracts. Contractors who specialize in home repairs and maintenance may find it harder to attract work because of the new laws, which limit their ability to charge inflated fees.
Conclusion: The new AOB laws in Florida were introduced in response to concerns about fraudulent claims and excessive costs. These changes in the law aim to balance the rights of homeowners and contractors and achieve some level of protection for the insurance industry. The implications of the new AOB laws on service providers and homeowners may not be fully understood for some time, but all stakeholders should closely monitor the impacts of the changes.