How to spot an AOB homeowners insurance scam

Tue Dec 03 2019

For homeowners, a roof leak or other home insurance claim might just be the start of their troubles. Some contractors may take advantage of what’s called an assignment of benefits (AOB) agreement and leave homeowners in the lurch. Though Florida passed a bill in 2019 aimed to curb the abuse of assignment of benefits, it’s important to recognize the potential pitfalls of signing over your claim benefits to another party.

Let’s look at what AOB abuse is so you don’t get taken for a ride.

What is an assignment of benefits?

An assignment of benefits (AOB) is an agreement that transfers your insurance claims rights to another party. When you sign an AOB form, you give someone else the authority to:

  • File an insurance claim.
  • Make decisions about repairs.
  • Collect insurance payments.

Homeowners who are dealing with major damage may assign their benefits to the business making the repairs because it has more experience working with an insurance company to settle a claim. A reputable restoration company may help the homeowner navigate the claims process. But a scammer may take advantage of the situation.

How can assignment of benefits be abused?

A disreputable business can easily abuse an assignment of benefits. Once you sign this agreement, you give up your rights as the homeowners insurance policyholder. This may mean:

  • Your insurance company will only communicate with the other party.
  • You lose the right to mediate claims.
  • You may have to pay penalties if you don’t comply with the AOB.
  • The other party can sue your insurance company.

Dishonest contractors take advantage of this situation by padding the bill and hiring an attorney to sue the insurance company when it does not pay the bill in full or denies the claim. Some found the system so lucrative that they paid plumbers up to $2,500 for every homeowner who signs an AOB. Lawsuits filed by contractors who have been assigned benefits by their clients were on the rise, according to the Tampa Bay Times – AOB claims in Florida jumped from 405 in 2006 to 28,000 in 2016.

Florida’s new legislature caps attorney fees on AOB lawsuits, which should help deter these opportunistic practices. Florida insurance regulatorsFlorida insurance regulators have also taken steps to share information and resources about AOBs and AOB scams.

How assignment of benefits abuse hurts homeowners

Assignment of benefits abuse, like all insurance fraud, can hurt policyholders. The abundance of AOB lawsuits against insurance companies drove up home insurance premiums to offset losses – in fact, this type of litigation is one of the reasons that home insurance costs in Florida have risen considerably in recent years. The hope is that the legislation to reform AOB practices will help bring those costs down over time.

Plus, most AOB agreements permit the contractor to collect their fees from the policyholder if the insurance policy doesn’t cover the damage or the insurance provider won’t pay the full amount demanded. If the AOB vendor tries to collect from you and you can’t pay, they can place a lien on your property for the amount owed.

How homeowners can avoid assignment of benefits abuse

To avoid unscrupulous vendors, watch out for these red flags:

  • Someone knocks on your door and tells you there is damage you didn’t know about.
  • A contractor promises something for nothing, such as a free roof or kitchen renovation.
  • Someone claims the damage is greater than it clearly is.
  • Permanent repairs begin before your insurance company is notified or allowed to inspect damages.
  • The form looks unprofessional or has misspellings and poor grammar.
  • Forms have any blank spaces to be filled in later, after you’ve signed.

You can also avoid an assignment of benefit scam by doing the things you would normally do before signing a contract:

  • Ask questions. A reputable business owner is willing to answer any question you ask.
  • Read the forms. Make sure you understand what benefits you’re signing away.
  • Check your policy documents. AOBs may not be permissible for your policy, so be sure to check before you sign.
  • Know your rights. You don’t need an AOB to get your claim processed or the repairs started.
  • Contact your carrier. Before executing an AOB, check with your insurance carrier or agent to get their opinion on its validity.

Assignment of benefits can be useful in some situations, but be vigilant. It’s not a small thing to sign away the rights to your insurance benefits. That’s why we offer a discount when you choose to maintain your control during the claims process.

Editor’s note: This post was originally published in December 2019. It has been updated for accuracy and comprehensiveness.


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