Understanding Insurance Assignments of Benefits - Naples Real Estate

Thanks to Hurricane Irma, we had some roof repair needs that we had to deal with. Our first round with the insurance company resulted in a denial to pay for our roof repairs because it didn't meet the 25% rule... however, we learned later that our roof tiles were no longer being produced and that the roof repairs needed were more than originally assumed... so we decided to try again with getting the insurance company to accept the claim and cover it. During this process, we came into contact with a number of roofing companies that were willing to take the lead on helping us. It was our first experience with having to consider the Assignment of Benefits, which led to some self-initiated research that I wanted to share with others.

So, let's begin with the background of what Assignment of Benefits (AOB) is and then we can dive into the implications and considerations of this.

In short, an AOB gives the third party authority to file a claim, make repair decisions and collect insurance payments without your involvement. In the case of the roof, the roofer was "offering" to help us by working directly with the insurance company. If we were to proceed with this, then a contract is signed between the homeowner (the insured) and the service provider (the roofer). For us, this sounded very attractive because the Roofer was willing to take on the work associated with the claim including any litigation if needed. Not only did this save us time, but they were experts in the process, which we thought could enable a better outcome. 

We ultimately decided to move forward with this arrangement in this particular situation. But, it was only after careful consideration and research. Here are some of the things I suggest considering:

• There is no right of rescission or cancellation provision with an AOB and once signed, the AOB is a valid contract and you are bound by the provisions of the contract. If the third party will not agree to release you from the contract, the only recourse is in a court of law.
• Depending on the language in the AOB, the insurance company may only be able to communicate directly with the third party. The insurance company may not communicate with you regarding the claim.
  
• Depending on the language in the AOB, you may lose all rights to the insurance claim, including the right to mediate the claim or to make any decisions regarding the claim, including repairs.
  
• Depending on the language in the AOB, the third party may be able to endorse checks on your behalf.
  
• Once you have signed an AOB, the third party may file a law suit against your insurance company, with or without your knowledge.
  
• You may be subject to property liens, or other financial fees or penalties for failure to comply with the terms and conditions in the AOB.
  
• Verify the license (if one is required) of any contractor or vendor that you hire to make repairs to your property. You should also verify the company or person’s general liability and workers’ compensation insurance coverage. In our case, we not only called references but went by the personally see the completed work and meet the references in person.
  
• Ensure that the scope of work is clearly mapped out.

As with any legally binding contract, you should consult with an attorney on any question or concerns prior to signing.