If you come home to find that a burst pipe has flooded your kitchen and living room, your homeowner's insurance coverage can be a lifesaver.  Unfortunately, many policyholders contact a water extractor only to have the situation go from bad to worse.  This supposed expert informs you that all you need to do is sign a few forms to have the problem handled.  Unfortunately, a recent article published in The Daytona Beach News-Journal and written by Rep. David Santiago, R-Deltona, discussed a widespread scam in which unscrupulous third parties are taking control of homeowner's insurance claims but failing to protect the policyholder’s interest.

Homeowners should carefully read any forms provided by contractors called to perform such mitigation work before signing the documents.  A growing number of people do not realize they are signing away their rights to pursue an insurance claim and exposing themselves to a lawsuit or lien.  Scam artist have been exploiting distressed homeowners coping with these types of emergencies by inflating their cost of work.  The consequence is that the policyholder may become liable for the difference between what the insurer legitimately owes the contractor and the amount billed by the contractor.

The mechanism used by scam artists to exploit homeowners is referred to as an “assignment of benefits” or “AOB” form.  This document authorizes the insurer to make payments directly to the contractor for the work undertaken obviating the need for the insured to incur any upfront costs associated with the repairs.  Although an AOB arrangement can be helpful in expediting repairs, AOB forms have become a tool of unethical vendors who hide information about the status, nature, and cost of claims.  The situation can become even more perilous for an insured when the vendor submits a padded bill for repairs to the insurance company.  The contractor may subsequently sue the insurer for the difference on behalf of the insured.

Rep. Santiago has indicated that he will make this a key issue in the current Florida legislative term because there has been a glut of claims filed by roofers, water extraction companies, and other contractors who have used AOB forms to increase their profits.  In addition to direct harm to the homeowner who might be stuck with substandard work and a lawsuit or lien, this abuse of AOB arrangements drives up insurance rates by 17 percent annually according to a former Florida Consumer Advocate.  Claims based on an AOB cost an average of $32,000 to settle, which amount to three times the average cost of claims that do not involve an AOB form.  Data from Citizens Property Insurance Corp. indicates that it paid out 51 percent of every dollar on water claims whereas only 18 cents on every dollar was being stockpiled to handle a future hurricane.

One suggestion to avoid the misallocation of Citizens funds and to protect homeowners is to permit policyholders to remain involved in their insurance claim after execution of a legitimate use of AOB.  

You can reach Miami Insurance Claims Lawyer J.P. Gonzalez-Sirgoby dialing his direct number at (786) 272-5841, calling the main office at (305) 461-1095, or Toll Free at 1 (866) 71-CLAIM or email Attorney Gonzalez-Sirgo directly at [email protected].

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