Homeowners Insurance Florida – Assignment of Benefits (AOB)

homeowners insurance Florida

To many homeowners the clauses buried deeply in their insurance policies are overlooked. They contain lots of apparent legal mumbo-jumbo with probably no real impact on one’s coverage until disaster strikes. If you insure property in Florida you may want to study more closely a clause that can cause you severe problems and is greatly responsible for raising your premiums. This clause is Assignment of Benefits, “AOB”.

What is an Assignment of Benefits (AOB)?

From the website of the Florida Insurance Regulator we have an explanation:

An Assignment of Benefits, or an AOB, is a document signed by a policyholder that allows a third party, such as a water extraction company, a roofer, or a plumber, to “stand in the shoes” of the insured and seek direct payment from the insurance company.

AOBs have been a part of Florida’s marketplace for more than a 100 years. Loopholes in the way it is being used in the marketplace are driving up costs for homeowners across the state due to unnecessary litigation associated with certain AOB claims. 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.

What Is The Purpose of Assignment of Benefits?

This clause is designed to appear to relieve the homeowner of the hassles of settling claims after they have been paid what they are owed from a loss. In fact, it is an agreement that, once signed, transfers the insurance claims rights or benefits of the policy to a third party. An AOB gives the third party authority to file a claim, make repair decisions and collect insurance payments without the involvement of the homeowner.

How Does Assignment of Benefits Work?

For example, you as a homeowner have a claim from a storm, say for $10,000 of repairs. An attorney or contractor doing home repairs, approaches you, offers to pay the claim in full and, with your permission, settle with the insurance company. Perfect, you think.  You may be presented with a document to sign so that repairs may proceed. It may well contain AOB language. Read it carefully.

The attorney/contractor then sues the insurer for $1,000,000 citing all types of shortcomings, deficiencies and skull duggery in the claim settlement.

Assignment of Benefits Florida Homeowners Insurance

This action is occurring so often in Florida that premiums have been raised and the legislature has been pummeled by insurers and homeowner groups to make changes to the law. To no avail, so far.

At a recent panel discussion put on by Demotech, the question was asked, “What if the legislature was giving a small set of trial lawyers $1 billion a year. And what if you and every one of the six million property homeowners in Florida had to write a $400 check each year to contractors and their lawyers?  That’s a different way of looking at this issue.  But that’s what’s happened.”

An insurer in Florida, known as the insurer of last resort as it is owned by the state and is intended to insure homeowners who cannot obtain coverage from any other insurer, Citizens Property Insurance Corporation, has declared that it is receiving over 350 claims each month for AOB claims from non-homeowners.

If you want to learn more, you can read our Florida Homeowners Insurance State Guide to find affordable homeowners insurance in Florida.

Florida Assignment of Benefits Legislation

The legislature has been unresponsive, even from efforts within the government. The Office of Insurance Regulation crafted and submitted a bill this year to clarify that only the homeowner claimant would be entitled to file a suit. It, and similar reform measures, failed to pass. This clause appears in many other states also, but Florida is the leader, far and away, in its use by third parties to move you as claimant out of their way to proceed.

What Should You Do In Event of A Claim?

Read your policy. Even if not completely understandable, it will give to you a good start. Contact your insurance company or agent. Don’t sign any AOB with blank spaces. Don’t feel obligated to sign it. Your claim will be satisfactorily adjusted in all likelihood. If you need any homeowners insurance, check our free home insurance quote services.

But be aware: if you sign this agreement and there is a dispute among the other parties with litigation resulting, you may well be brought in to it. If the insurer or the contractor/attorney are not satisfied with monies received you may be seen as responsible for the additional payments and a lien placed upon your property.

About Michael Mead

Michael Mead, CPCU, was President of the Missouri Captive Insurance Association and has served as Editor of the Captive Insurance Company Reports for many years. Formerly both an underwriter with a major global insurer and an executive with a major global broker, Mead is the winner of the CICA Distinguished Service Award.