Assignment of Benefits
What are the concerns or risks regarding AOBs?
AOBs have long been a part of Florida’s insurance marketplace. However, abuses in the way they were being used in the marketplace have driven up costs for homeowners across the state due to unnecessary litigation associated with certain AOB claims.
Consumers should be aware, when signing an AOB, that they may become involved in the third-party vendor’s lawsuit against the insurance company if the third party and company are in dispute on the payment amount of the claim.
What precautionary measures can consumers take prior to signing an AOB?
OIR offers the following tips consumers should consider prior to entering into an AOB contract.
- Read your insurance policy carefully.
- Know what your responsibilities are after a loss.
- Know whether your insurance policy restricts your ability to assign your benefits and the terms of any restrictions.
- Know whether your insurer partners with any repair companies.
- Contact your insurance company prior to signing the AOB.
- Read the AOB carefully, ask questions, and do not feel pressured to sign it.
- Do not sign if there are blank spaces contained in the document.
Is a consumer required to sign an AOB to have repairs completed?
No. Consumers can file a claim directly with their insurance company. Filing a claim directly with the insurer allows the consumer to maintain control of the rights and benefits provided by their policy in resolving the claim.
How does a consumer know if they are signing an AOB?
After a loss, a consumer might call a roofer, contractor, plumber, water extraction company, or other third-party vendor to assist with emergency repairs. Once those vendors have assessed the damage, contractors or vendors may present consumers with a document to sign prior to beginning any work.
If the document is an AOB, it will sign over the consumer’s insurance benefits to the contractor or vendor and give this third-party the ability to negotiate and endorse claim payments or file suit against the insurance company on the consumer’s behalf.
An AOB must contain the following paragraph:
YOU ARE AGREEING TO GIVE UP CERTAIN RIGHTS YOU HAVE UNDER YOUR INSURANCE POLICY TO A THIRD PARTY, WHICH MAY RESULT IN LITIGATION AGAINST YOUR INSURER. PLEASE READ AND UNDERSTAND THIS DOCUMENT BEFORE SIGNING IT. YOU HAVE THE RIGHT TO CANCEL THIS AGREEMENT WITHOUT PENALTY WITHIN 14 DAYS AFTER THE DATE THIS AGREEMENT IS EXECUTED, AT LEAST 30 DAYS AFTER THE DATE WORK ON THE PROPERTY IS SCHEDULED TO COMMENCE IF THE ASSIGNEE HAS NOT SUBSTANTIALLY PERFORMED, OR AT LEAST 30 DAYS AFTER THE EXECUTION OF THE AGREEMENT IF THE AGREEMENT DOES NOT CONTAIN A COMMENCEMENT DATE AND THE ASSIGNEE HAS NOT BEGUN SUBSTANTIAL WORK ON THE PROPERTY. HOWEVER, YOU ARE OBLIGATED FOR PAYMENT OF ANY CONTRACTED WORK PERFORMED BEFORE THE AGREEMENT IS RESCINDED. THIS AGREEMENT DOES NOT CHANGE YOUR OBLIGATION TO PERFORM THE DUTIES REQUIRED UNDER YOUR PROPERTY INSURANCE POLICY.
Can the AOB agreement be canceled?
Yes. Following AOB reform in 2019, a consumer can cancel an AOB without any penalties or fees. To cancel, the consumer must give the third-party vendor signed written notice of the desire to cancel the AOB at one of three points during the repair process:
(1) Within 14 days after executing the AOB;
(2) At least 30 days after the date the third-party vendor is scheduled to start work, if that vendor has not already completed a substantial amount of the work; or
(3) At least 30 days after executing the AOB, if the AOB does not have a start date for the work and the third-party vendor has not begun substantial work on the property.
What significant changes came from the 2019 AOB reform?
According to the Department of Financial Services, there were 405 AOB lawsuits across all 67 Florida counties in 2006, and that number had risen to 28,200 by 2016.
To stem the AOB misuse, OIR worked with the Governor, Cabinet, and Florida Legislature to pass significant consumer protection reform related to AOBs. On May 23, 2019, Governor DeSantis signed into law House Bill 7065 (2019) (“HB 7065”), a significant reform to the AOB landscape, effective July 1, 2019.
HB 7065 created section 627.7152, Florida Statutes, which contains definitions and required provisions for AOBs, referred to as “assignment agreements” in the statute, that are executed under residential or commercial property insurance policies. An AOB that does not comply with this new section is not valid under Florida law.
HB 7065 also created section 627.7153, Florida Statutes, which provides standards for policies that restrict the right to assign post-loss insurance benefits in whole or in part under a property insurance policy. Insurers offering restricted policies must notify an insured at least annually of the coverage options available for the assignability of benefits and must attach that notice to the premium notice. A restricted policy must be available at a lower cost than a policy that provides the same benefits but does not restrict assignment rights.
Assignment of Benefits Data Calls
In June 2019, OIR issued Informational Memorandum OIR-19-02M to notify insurers that a data call would be issued sooner than required in order to evaluate the preliminary impact of HB 7065. OIR has proactively issued a data call in 2020 to evaluate the preliminary impacts of the legislation.
Previous AOB data call reports are listed below: