Tag: aob

Assignment of Insurance Benefits: New Law Creates Strict Standards for Property Insurance AOB Agreements

It’s been a few months since Florida’s new assignment of benefits (AOB) laws went into effect. AOBs generally authorize vendors (contractors, water remediation companies, etc.) to collect payment for their work directly from the owner’s property insurance company. AOBs are commonly included in contracts and can be easily abused by unscrupulous contractors. Since property losses often require immediate attention, home and business owners often had no choice but to sign the AOB and hope for the best. But that’s no longer the case.

As of July 1, 2019, an assignment agreement for services to protect, repair, restore or replace property or to prevent further damage after a property loss MUST:

  • be in writing and signed by the parties;
  • give the property owner at least 14 days to cancel the contract without penalty or fee;
  • be furnished to the insurance company within 3 business days after being signed or the date on which work begins, whichever is earlier;
  • include a written, itemized, per-unit cost estimate of the services to be performed;
  • include the statutorily required notice of rights in conspicuous uppercase and boldfaced type; and
  • require the vendor to indemnify and hold the property owner harmless from all liabilities, damages, losses and costs if the property insurance policy prohibits AOBs.

An assignment agreement may NOT contain:

  • a fee or penalty for cancelling or rescinding the contract;
  • a check or mortgage processing fee; or
  • an administrative fee.

If a contract fails to satisfy these requirements, the AOB is invalid and unenforceable. It’s still too soon to know the impact these reforms may have on home and business owners in need of urgent repair or loss mitigation services following a property loss. We’ll just have to wait and see. In the meantime, please contact us if you have any questions about obtaining adequate property insurance under Florida’s new AOB laws

Assignment of Insurance Benefits: Non-Assignable Policies Provide New Way to Save on Property Insurance

In a previous article we introduced you to the sweeping statutory reform of Florida’s assignment of insurance benefits (AOB) laws. This reform was designed to limit the use of post-loss AOB agreements by insureds to assign their rights under an insurance policy to a third party. Home and business owners commonly used AOBs after a property loss to authorize a vendor, like a water remediation company, to collect payment for services rendered directly from the property insurance company rather than from the insured. But that was before various statutory reforms regulating the use of post-loss AOBs went into effect on July 1, 2019.

According to Office of Insurance Regulation, Florida’s property insurance market is being harmed by the abuse of post-loss AOBs. Individual policyholders, on the other hand, often benefit to some degree from having the freedom to enter into an AOB agreement. A homeowner with an overflowing toilet, for example, can sign an AOB agreement to get urgent water remediation services without going out-of-pocket instead of paying the bill upfront and waiting to be reimbursed later.

Though a collective approach to fixing the problem sounds good in theory, it’s hard to worry about the overall property insurance market when three inches of standing water is in your living room. Fortunately, those who are not willing to “take one for the team” may be able to keep the right to enter into post-loss AOB agreements…for a price.

As of July 1, 2019, Florida insurers have the option of offering residential and commercial property insurance policies that preserve, partially restrict or completely eliminate an insured’s right to enter into a post-loss AOB agreement. However, an insurance company may only offer polices that restrict the right to execute a post-loss AOB agreement in whole or in part IF:

  • The insurer also offers coverage under a policy that does not restrict the insured’s right to execute a post-loss AOB agreement.
  • Each restricted policy is available at a lower cost than the unrestricted policy.
  • Policies prohibiting post-loss AOBs in whole are available at a lower cost than policies that prohibit them in part.

Each restricted policy must also include the following notice in boldfaced type: THIS POLICY DOES NOT ALLOW THE UNRESTRICTED ASSIGNMENT OF POST-LOSS INSURANCE BENEFITS. BY SELECTING THIS POLICY, YOU WAIVE YOUR RIGHT TO FREELY ASSIGN OR TRANSFER THE POST-LOSS PROPERTY INSURANCE BENEFITS AVAILABLE UNDER THIS POLICY TO A THIRD PARTY OR TO OTHERWISE FREELY ENTER INTO AN ASSIGNMENT AGREEMENT AS THE TERM IS DEFINED IN SECTION 627.7152 OF THE FLORIDA STATUTES.

Insurance companies must notify insureds of their restricted policy options at least annually. Insureds must reject fully assignable policies in writing or electronically using an approved form with the following boldfaced type heading: YOU ARE ELECTING TO PURCHASE AN INSURANCE POLICY THAT RESTRICTS THE ASSIGNMENT OF BENEFITS UNDER THE POLICY IN WHOLE OR IN PART. PLEASE READ CAREFULLY.

We don’t yet know which insurance companies may begin offering policies with restricted post-loss AOB rights, how these policies will read or how Florida’s property insurance market will react. We’ll let you know when we find out. Please contact us if you have any questions about Florida’s AOB reform.

Assignment of Insurance Benefits: How Will Florida’s AOB Reform Affect Floridians?

An assignment of insurance benefits (AOB) allows a vendor to collect insurance proceeds directly from the insurance company instead of the insured. Many are surprised to discover that AOBs are quite common. In fact, if you ever had property damage that required a construction contractor or water remediation company, you probably signed an AOB. Surprised?

In recent years, AOBs have become common in property insurance claims. A typical example involves a property owner (the “Assignor”) assigning benefits under a property insurance policy to a contractor, water remediation company or other vendor (the “Assignee”) who repairs the damaged property and bills the insurer for the work.

According to the Florida Office of Insurance Regulation (OIR), the increasing use and abuse of AOBs are negatively impacting Florida’s property insurance market. Property insurance claims have significantly increased in frequency and severity. Claims that involve an AOB are also more likely to end up in litigation. Why is this significant? In 2018, the average cost of litigated water claims was nearly $20,000 higher than non-litigated claims.

This year, when the OIR testified that continuing post-loss AOB abuse will result in higher premiums and fewer options as insurers exit the market, the Florida Legislature was listening. The result was sweeping statutory reform that should substantially change the future AOBs in Florida. This reform includes new laws designed to address the abuse of post-loss AOBs for property insurance claims by:

  • establishing requirements for AOB contracts (execution, validity, rescission, etc.);
  • capping the amount an Assignee (contractor, water remediation company, etc.) can receive under an AOB for emergency residential property insurance claims;
  • allowing insurance policies to limit or prohibit AOBs under certain conditions;
  • transferring certain pre-lawsuit duties under an insurance policy to the Assignee;
  • restructuring the statutory entitlement to attorney’s fees in litigated AOB claims; and
  • requiring insurance companies to report specific AOB claim data annually.

Will these reforms be effective? Will they stop the bad actors from abusing AOBs? Will they stop the good actors from providing critical services to Floridians who suffered property damage? It’s too soon to know, but time will tell.

In the coming weeks, we will be covering some of the more substantial changes made by the new AOB laws. Stay tuned!