How Assignment of Benefits Work

Cam Fentriss, FRSA LEGISLATIVE COUNSEL

If you are a roofing contractor, you are most likely getting a lot of e-mails from lawyers, hail mapping companies, and other businesses that specialize in finding customers who can suddenly be in need of a new roof at the expense of their insurance company. Hmm – does that sound a little odd to you? It should and it is.

This scheme is something that was used with sinkholes and mold until the insurance industry found a way to shut the abusive practices down by excluding or limiting the claims. The same thing is now happening with so-called “water restoration” companies and the attorneys and sales companies that promote this are moving aggressively into the roofing industry.

For the water restoration work, the statistics are incredible. In 2014, for Citizens’ Property Insurance Company, non-weather related water damage accounted for 56 percent of claims. That is absolutely ridiculous.

Here is a rough idea of how it works. A property owner has a leak and calls a plumber. The plumber fixes the leak, then refers
customer to a water damage company (that will be paying the plumber a referral fee, sometimes $1,000 or more). The water damage company’s agreement for the work includes an “assignment of benefits” (or AOB) that says the customer assigns his insurance benefits to the water damage company.

Once the contract with an AOB is signed, then the water damage company as good as has a license to do 10 or 20 times more work than what is needed. With the AOB, the insurance company has to answer to the water damage company, not the policyholder. If the insurance company does not pay up, then the water damage company sends it to the lawyer who taught the water damage company how to do these contracts with an AOB. That lawyer files a lawsuit and the bills start to go up, up, up.

These lawyers are very smart. They know very well that this type of work cannot last very long before the insurance industry and the government find a way to stop it. They know that the millions from water damage claims is about to dry up, so they are working very hard to migrate over to roofing work so they can drain every dime out of our industry before insurers put a stop to that too.

The question for us is whether we want to stand by and watch a few roofing contractors make a lot of money for a short time before property insurers rewrite their policies to dramatically cut the funds that will be paid for a damaged roof. Until the insurers and regulators catch up, these aggressive sales forces will continue to march across our state finding “reasons” people need a new roof and greedy lawyers will be more than happy to file one lawsuit after another to pressure insurance companies to pay up.

Some may be tempted to believe that insurers and regulators would never allow the same kinds of limits or exclusions for roofing work coverage as exist for less crucial work like mold. But it’s not really a matter of choice if you want to keep property insurers in Florida and you want to provide insurance that people can actually afford. As the number of claims goes up, at some point, they will have to increase the rates to cover the additional cost. They will have the statistics to show exactly why a rate increase is needed and, before the government allows enormous increases in premiums, limitations on payments for roofing work will be on the table.

FRM

Anna Cam Fentriss is an attorney licensed in Florida since 1988 representing clients with legislative and state agency interests. Cam has represented FRSA since 1993, is an Honorary Member of FRSA, recipient of the FRSA President’s Award and the Campanella Award in 2010. She is a member of the Florida Building Commission Special Occupancy Technical Advisory Committee, President of Building A Safer Florida Inc. and past Construction Coalition Chair (1995-1997).