A hot insurance topic in the news today is costing people a lot of grief and money. If not handled properly, you could give up your rights during a property loss and be dragged into a lawsuit with your contractor for repairs you thought were covered under your policy.
It’s a known fact that water losses are the most frequent and costly types of claims for property insurance companies in Florida. For every premium dollar collected, about 1/3 is paid out in water claims.
If you have the unfortunate experience of discovering water damage, your most immediate concern is usually to prevent further damage, and ultimately the spread of mold. With moisture and humidity in the air, mold is a big concern that should be addressed immediately. Your first step is to call a plumber or disaster cleanup company and begin the remediation cleanup process.
When the cleanup crew arrives, you might be asked to sign a contract to begin work that also promises to streamline the process of working with your insurance carrier. What you might not realize is that the contract that you sign could contain a provision called an Assignment of Benefits or AOB, which essentially assigns your right to recover from your insurance company to the contractor you just hired.
AOB’s were originally created to protect the general public, but the technique is being used by dishonest people to take advantage of both customers and insurance companies.
Here’s what happens. After you sign your rights away, the contractor performs work and then approaches your insurance company for payment directly. The AOB gives your contractor the right to recover from your insurance company and cuts you out of the equation entirely.
Many times, the project costs are inflated making it difficult for insurance carriers to contest the claim entirely, and a settlement is reached quickly before things get out of hand. The contractor may even invoice the insurance company for additional work performed that isn’t recoverable under your policy, and could turn to you for the balance owed. If you decide not to pay, you might find yourself in court.
In the 9 years between 2005 and 2014, AOB claims increased 1,000%. In 2014 alone there were 92,521 AOB claims, up from 9,424 in 2005. Congress has two bills on the table right now that are designed to deal with this issue. For the time being, it’s important to be informed and know how to deal with these claims ahead of time to protect yourself.
The best way to safeguard against these unscrupulous characters is to make contact with your insurance agent as soon as you discover a loss. Even better, contact your agent today and find out who is on your insurance carrier’s list of preferred vendors. Typically, carriers have agreements in place with contractors and remediation companies ahead of time to prevent these issues from occurring. In the end, you will save yourself time and a potential lawsuit, or additional unnecessary out of pocket expenses.
Would you like a personal risk management review? Contact RMC Group at 888.599.5553 and let us help you!