|Date:||September 20, 2017|
TALLAHASSEE — As homeowners in Central Florida and throughout the state assess damage inflicted by Hurricane Irma, many could find themselves in the middle of a tug-of-war between their insurance companies and contractors.
More than 452,000 insurance claims worth an estimated $2.7 billion have been filed in the aftermath of Hurricane Irma so far, with more to come.
But even before Irma hit, state regulators and insurance companies were warning customers about contractors who might push homeowners to sign contracts to get work done quickly.
Such“assignment of benefits” contracts allow the contractor to receive payment from the insurer instead of the homeowner. Insurance companies have complained for years that unscrupulous contractors gouge them for unnecessary repairs or work that is purely cosmetic, using such agreements.
“When a consumer signs an AOB, that document assigns all of a policyholder’s benefits to a stranger,” said Lisa Miller, a lobbyist for five insurance companies and a former state regulator. “The consumer loses control and their ability to work with their insurance company directly.”
In an emergency though, like a water pipe leak or serious roof damage, it could be the fastest way for repairs to be done, and the contractors say they need the forms for expensive repairs.
AOBs have “increased quite a bit, and I think that’s the reason for the insurance industry complaining about what a problem it is,” said Chip Merlin, a Tampa-based attorney involved in lawsuits against insurers. “At the same time, legitimate contractors, very credible contractors, want to make certain they’re protected if they’re doing the work and that they’re going to get paid for it.”
The Florida Office of Insurance Regulation is cautioning property owners to be leery of quick fixes without reading the fine print. A news release from the agency warned that homeowners could get caught up in a lawsuit if there’s a dispute between the contractor and the insurer, or even a lien placed on their house if they don’t pay the difference in the dispute.
“Homeowners are encouraged to file a claim directly with their insurance company to maintain control of the rights and benefits provided by their insurance policy in resolving a claim,” said Insurance Commissioner David Altmaier.
Merlin said regulators are right to warn consumers of AOB contracts, but the details matter. Some ill-advised contracts sign over the full amount of a claim to one contractor, such as a roofer or plumber, who won’t address other parts of the claim, such as personal property damage inside the home, he said.
Cam Fentriss, legal counsel for the Florida Roofing and Sheet Metal Contractors Association, said AOBs should only be used for true emergencies and for smaller claims, and her organization favors reforms to clamp down on those who take advantage of the system.
“That’s a big black eye on our industry,” Fentriss said. “We work extremely hard to try to make sure that our industry stays as clean as possible.”
Some contractors, though, are telling homeowners not to contact their insurance company and pushing AOB forms as the best option.
A post on the Facebook page of Clermont-based Noland’s Roofing tells consumers insurance companies “don't want you to sign the AOB because they don’t want to pay for the full amount of the claim. They would rather deal with the homeowner because you the homeowner don’t do this every day and therefore you don’t know what they are supposed to pay! I can assure you that we know what needs to be paid for.”
A manager for Noland’s Roofing did not return a call for comment.
In Tallahassee, insurance companies have been pushing legislation to reform AOB practices for the past three years but, so far, have had no success.
The move was spurred by a jump in AOB contracts and lawsuits, stemming mostly from claims related to water damage from burst pipes. In 2010, 5.7 percent of claims used AOB forms, but that figure rose to 15.9 percent in 2015, according to state data. The increase drove insurance rate hikes in the years before hurricanes Hermine and Matthew broke the state’s 11-year run without a hurricane last year.
Merlin said the bottom line for homeowners is that they should carefully consider all options before signing a contract and check the credentials of any contractor.
“For most people, their home is their most valuable investment, and you want to have somebody that’s reputable, that’s going to do a great job,” Merlin said.