Merlin Law Group Knowledge Manager Ruck DeMinico recently sends me North Dakota legislation to Assignment of Benefit contacts. This topic was also hotly debated two weeks ago at the Windstorm Insurance Conference in Orlando. Insurance restoration contractors, their lobbyists and attorneys are desperately trying to prevent any changes that would make such contracts more difficult to enter or enforce. The Florida politician primarily responsible for overseeing insurance is Jimmy Patronis. Here is a news article describing his situation on the situation:
Technically we have a law on the books that are being legally exploited, ”said Chief Financial Officer Jimmy Patronis.
The law the CFO is talking about is Assignment of Benefits. It allows homeowners to sign a contract with a third party, such as a water extraction company, or a plumber, and allow the third party to act as the homeowner and seek payment for their work directly from the insurance company.
Patronis believes this should be allowed to happen but says bad actors in the business are taking advantage of it. So much so that in 2006 he said the state had 400 lawsuits involving AOB, in 2018 he says there were 31 thousand.
"You are taking their claim from them and giving them the comfort that you're going to solve all their problems. ”Patronis continued saying,“ when you are at the mercy of who you've just given your claim benefit to. But the bad attorneys and contractors that exploit it should bury them under the jail. "
Patronis says the easiest way to combat it is to have the insurance companies do their job.
" I have challenged the insurance carriers through multiple conference calls and just demanding to do your job, pay the claims, answer the phone calls, take care of the customer. ”Patronis says,“ If that is being done, if we are doing that then the consumer who is under duress is not looking for solutions that are outside the normal insurance process. ”
The CFO says if insurance companies are responding to their policyholders quickly enough, he understands why they are seeking outside help. But he had this message for the bad actors he calls scoundrels.
Out of the State of Florida, "said Patronis.
At least Patronis sees the issues, in part, as a two-way street. Not all politicians do.
Emerging Issues Within the Assignment of Benefits Clause :
About the past decade, the extension of assigning benefits has become seriously magnified in the state of Florida with a plethora of claims involving homeowners assigning their right to recover costs associated with first-party emergency physical damage repairs. Jay Neal, Florida Association for Insurance Reform (FAIR) President and CEO, estimates that the past decade, lawsuits filed by restoration contractors using an AOB commission have increased more than 1,000% (Neal, 2015). The past five years, however, represent the steepest increase in filed claims
An article, A Few More Thoughts About Assignments of Benefits written by Patrick Wraight, who is the director of the respected Academy of Insurance, stated the positive versus negative aspects of the Assignment of Benefit contracts:
The premise of the AOB
Let's reset again and make sure that we're all on the same page. An assignment of benefits is a document, or clause in a contract, that allows another party (a contractor, water mediation company, your doctor's office) to file for, and receive insurance benefits. This process allows the insurance company to negotiate and pay the assignee for the claim, rather than the customer having to pay their contractor first and then file the claim.
In theory, it's a great way to operate. Think about it. The customer takes one link out of the claim chain. Without the AOB, the process is centered on the customer who spends their time getting an estimate, sending it to the insurance company, negotiating with the adjuster about the most fair claim payment, receiving the payment, getting the contractor to start the work, paying the contractor, and then finalizing the claim (or reopening the claim if the repairs take more money that initially paid, which means starting over almost from the beginning).
The AOB makes it so that the insured can hire a contractor and then remove themselves from the process. All they have are their coffee, wait for the contractor to finish the work, and pay their deductible. OK, that might be an oversimplification, but you get the point. The insurance company works directly with the contractor to get the repairs going.
The problem with the AOB
As you know by now (because you're daily Insurance Journal readers), it just doesn It's work that way. Not every insurance company pays the claims that they should probably as easily as they should (sorry insurance people, but it's kind of true). Not every repair contractor files the correct amount for their claim. Sometimes they inflate the costs. What happens when the insurance company does not want to pay for the costs as presented by the contractor? That's right, the contractor calls their attorney and you know the insurance company contacts their legal team. What happens to the customer?
The customer finds himself in the middle of a feud, which might leave them waiting for the work to be done, or worse, they find that they are on the hook for the balance if the insurance company wins against the contractor. For the customer, the best case is that they get paid for and find out later that their insurance premiums go up (along with the rest of us, thanks) to make the extra expenses that the insurance company had.  I am not certain where all this is going to lead, but the issue is not just in Florida. Insurance lobbyists, state legislatures and departments of insurance have Assignment of Benefit contracts used for insurance restoration contractors on their national radar.
Nothing ever stays the same. It is easy to predict that the law and use of Assignment of Benefit contracts will not be the same in many states five years from now.
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of changing the world, but no one thinks of changing himself. ”
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