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What's the Chatter about "Assignments of Benefits?" (AOB)

4/9/2019 (Permalink)

A tennis racket is, when used appropriately, a fine instrument. If you play tennis, it helps you hit a serve or smash a solid groundstroke.

A tennis racket can be used the wrong way, potentially causing damage. It could be used to smash the windshield of a neighbor's car for instance. This, of course, would be a bad use for an otherwise harmless tool.

The same can be said for "assignments of benefits" (AOB) in the state of Florida. In and of themselves AOBs aren't controversial. Used appropriately, they can help business owners and home owners contract for services with a contractor. If that's all that's happening, all is fine, and there's no concern.

Problem is, there's lots of funny business in the state of Florida -- and Miami in particular. Many contractors misuse AOBs to game the system and wreak havoc on the insurance industry. This ends up costing residents and business owners in South Florida and throughout the state by indirectly beefing up insurance costs.

Here's how it can be abused. Say you have a flood in your home, and a water damage mitigation contractor comes in to provide emergency service and clean up the mess. Before workers begin extracting water, they'll throw a contract on your table and ask you to sign it. That contract could have AOB language, which gives the water mitigation company incredible powers. If the customer's insurance company doesn't pay what the mitigation company wants to charge, the mitigation company can sue the insurance company -- at the insurance company's cost.  That's right, the contractor can sue the insurance company and the insurance company will have to pay legal expenses when the contract features AOB language. The contractor feels a surge of power, because now they know they can charge above-market rates -- whatever they want, really -- and if the insurance company balks it'll be lawsuit time.

Who wouldn't want free legal representation on their side? Everyone would! At least, if they like to overbill and get rich quick. This is exactly what dubious contractors are thinking, and dubious contractors do exist in the emergency services world.

We want our customers to know that as a mitigation franchise we do NOT use AOBs. Rather, we sign customers up with a much less powerful "direction to pay," The "direction to pay" contract would restrict our ability to game the system, if gaming the system is what we ever wanted to do.  Our direction to pay does NOT give us the right to sue the insurance company at the insurance company's expense.  What this means is we have to be realistic and market-based when charging our customers, and we can't get away with overbilling because we don't get to sue for free.

Yes this makes it harder for us, because quite frankly sometimes the insurance companies are unreasonable. Not all the time, but sometimes . . . and increasingly so. 

Regardless, we want a smooth process for all our customers, and ourselves. With that in mind we do not make use of the controversial AOB in the state of Florida.