With the recent hurricane and all the damage that has been done because of it, we wanted to address an important topic that often comes up when dealing with some remediation and/or repair contractors. That topic is the use of Assignment of Benefits language in the construction agreement. It begins when you call a contractor to look at damage done to your home or, in many cases, the contractor happens to be in the neighborhood. They might tell you they can get the work done for free and be the person who contacts your insurance company to deal with filing a claim while you sit back and not worry about any of it. This sounds too good to be true and usually it is.
What these companies will do before starting any of this “free” work is have you sign a contract called an Assignment of Benefits (AOB) or Assignment of Policy Rights. This isn’t an authorization to repair or an authorization for your insurance company to simply name the contractor on the claim check. This gives them complete control of your policy and also gives them the rights to any payment made for your claim. The AOB language gives the third party company the authority to file a claim on your behalf, make repair decisions for you property without asking you or the insurance company, and collect the insurance payments without your involvement.
This might sound like the stress-free way to go, but it doesn’t always end well. Companies who use AOB’s are commonly known to start their work without taking any pictures of the damages beforehand. They will complete the job, sometimes without the best standards, and then try to file a claim. Insurance companies will want proof of the damages before any work was done in order to determine what would be covered under the policy and how much they should pay out for damages. When the third party is unable to provide proof of what work was initially needed, the company can deny the claim. The third party has every right to try and file a lawsuit against your insurance company and list you as an interested party.
What if you’ve signed this contract with a company, everything goes smoothly and your insurance carrier is able to complete their own inspection and agrees to pay for your damages? You decide you no longer want to file a claim and tell both your insurance carrier and the third party company that you wish to close the claim. The third party remediation or roofing company can now come against you for the money they were expecting to get from your insurance carrier and any legal fees they might incur from taking you to court.
It should be pointed out that not all contractors use Assignment of Benefits language in their contracts. And as a matter of fact, there are some that use AOB language and simply don’t abuse it. Still, we would caution everyone to read before you sign and again, if it sounds too good to be true, it probably is.
Dealing with a claim can be chaotic and confusing, but if you are suspicious about any contract or have questions call your licensed insurance agent or your attorney before signing anything. We are here to help you during your claim and are available at 863-683-2228 or www.heacock.com.