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Hurricanes And “Assignment Of Benefits.”

You may remember a little afternoon shower that rolled through the state of Florida a couple of months ago. NOAA named the meteorological disturbance “Hurricane Irma.”

Irma caused lots of damage which is estimated in the tens of billions of dollars, but Irma may be highlighting, or at least bringing more to the forefront, another gathering storm.

This one is an economic storm.

According to the Wall Street Journal:

These assignment of benefit, or AOB, contracts are upending the insurance market in one of the largest U.S. states. Insurers and regulators said the pacts are responsible for driving up insurance rates for some Florida homeowners and spurring a boom in contractor lawsuits against insurers.

Based on current AOB trends, the average statewide annual homeowners insurance premium for a $150,000 new home is projected to rise from $1,232.08 in 2017 to $1,595.07 in 2022, a 29% increase, according to the Florida Office of Insurance Regulation. These increases are higher than nationwide projections from the Insurance Information Institute, a trade group.

AOBs allow repair companies to report a homeowner’s claim to an insurer and be paid directly, without the money going first to the consumer. Contractors can sue the insurer if there is a disagreement about the cost of the claim. They also can go after homeowners to make up for shortfalls if the insurer doesn’t pay the full amount requested, according to regulators.

Other states allow AOB agreements, but they have had a larger impact in Florida because of a state law that requires the insurer to pay attorneys’ fees if more money is awarded after a lawsuit than was initially offered. Insurers say the use of AOB agreements in Florida encourages contractors to overcharge insurers for repair work and perform more work than is needed.

Some lawyers, consumer advocates and contractors say AOB agreements can help homeowners who are unfamiliar with the claims process and don’t know how to navigate the system. Many homeowners are frustrated when some insurers can take days or even weeks to send adjusters to inspect damage, said Sha’Ron James, Florida’s insurance consumer advocate.

“The lawyers have found an opening,” Ms. James said. “They realized there are a lot of unhappy consumers.”

Some contractors say the agreements also ensure builders are paid fairly for their work. “Unless I have an assignment of benefit, I may not get paid, or I won’t get paid the right amount,” said David DeBlander, president of Pro Clean Restoration and Cleaning in Pensacola, Fla.

Frankly, we aren’t sure of the claims of the insurance industry and don’t see them as “victims.” At the same time any contractor who isn’t paid the “correct amount” or “not paid at all,” has written a bad contract with the person for whom they are working.

You really should read the entire article. In our opinion, it is timely, educational and well balanced.



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