Common Insurance Defense Tactics to Avoid Assignment of Benefit Claims

J.P. Gonzalez-Sirgo
Founder of J.P. Gonzalez-Sirgo, P.A.

Assignment of benefits (often abbreviated as AOB) lawsuits are a growing concern for homeowner’s insurance carriers in Florida and elsewhere. Insurance companies have pressed the Florida Legislature for several years to enact reforms that would allow insurance companies to restrict a policyholder’s assignment of benefits to a third party. Where disputes have made their way to courts, insurance companies have attempted to advance a variety of arguments as to why the AOB in question in that particular case should not be enforced. Thus far, such legislative and judicial efforts have failed, but this is not deterring insurance companies from continuing their efforts to prevent AOBs from being enforced.

The AOB Problem from the Insurance Company Perspective

Insurance companies and their insureds get into AOB disputes when the insured signs a document assigning certain benefits he or she allegedly has under his or her homeowner’s policy to a third party like a loss mitigation company. If the insurance company then fails to pay the third party after the contractor bills the insurer, the firm that performed the work will often file a lawsuit to recover the benefits the third party alleges it is owed.

Following a heavy rain and subsequent water damage (or a fire or other catastrophe), for example, the homeowner will typically call a repair and restoration company. Unless the homeowner has some particular insight into the repair and restoration industry, the homeowner often will contact the first company that it can find in either the telephone directory or online. The company will arrive and have the homeowner sign an Assignment of Benefits form, which essentially gives the company a right to any post-loss benefits the homeowner would have received under the policy. The company performs the repair and restoration work and then seeks payment for its services, claiming entitlement to payment as a result of the AOB form signed by the policyholder. When the insurance company decides the homeowner did not have coverage or otherwise declines to pay the company, the remediation firm files a lawsuit against the insurer.

Insurance Companies Combat AOB Lawsuits

Insurance companies have scrambled to find a way to combat what they allege constitutes “AOB abuse” after one of their chief methods of resisting these lawsuits was wiped away by Florida courts. In an AOB lawsuit, insurance companies previously had attempted to defend such lawsuits by claiming a homeowner could not assign benefits that an insurance company had not yet determined existed. When this line of reasoning was rejected by the courts, insurance companies had to turn to other tactics.

Some insurance companies may now attempt to vigorously defend AOB cases on the merits.  Instead of claiming the AOB is invalid, the insurance company may attempt to litigate the issue of whether the homeowner’s policy covers the loss and/or the services performed by the company. The goal of such a move would be to make these cases too costly to litigate for certain repair and restoration companies derailing the AOB process.  In the alternative, insurance companies may attempt to settle such lawsuits at the outset so as to prevent the attorneys representing these companies from receiving significant attorney’s fees. 

This dispute might not appear to directly impact the homeowners.  However, the ability to get a contractor to perform immediate repair and remediation work without waiting for an insurance payout or needing to advance the cost is a valuable benefit for policyholders. 

If you have questions about an insurance claim, you are invited to contact our law firm to speak to an experienced Miami insurance claims attorney.  My law firm specializes in representing policyholders in claims disputes in Miami and throughout Florida. Click here to read about some of our case results.  The Law Firm of J.P. Gonzalez-Sirgo, P.A. offers free consultations and case evaluations. No Recovery, No Lawyer Fees. Call 305-461-1095 or Toll Free 1-866-71-CLAIM. 

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