In the Wake of Destruction: Beware of AOB Scams


After the recent destructive storms of the most current hurricane season (of which we are still not out of), it is time to send out the annual reminder to watch out for those who wish to take advantage of Assignment of Benefit forms to scam consumers and those who have just suffered devastating losses.

What is an Assignment of Benefits (AOB)?

This is an agreement that transfers your insurance claims rights to a third party. If an AOB is signed, it gives the third party the right to file insurance claims on your behalf, make decisions about costly repairs and who gets to perform them, can collect payouts on all of these insurance claims and even sue your insurance company.

While there are reputable reasons for a contractor or restoration company to ask for an assignment of benefits, such as a company doing major restorative work that can help you make sense of a complicated claims process, the vast majority of the recent scams go something like this.

You’ve just lived through a devastating storm, only to come home or out of your house to find a tree through your roof, windows shattered, and broken plumbing that has flooded two rooms.

A few days later as everyone is cleaning up their respective yards, a truck pulls up in front of your home. The gentleman who approaches you may say that he is a contractor who is getting ahead of the rebuilding rush and giving free estimates. He may even claim that he was sent by an insurance company to survey damage. He might inspect the property and tell you that he can perform all of these repairs, and all he would need to get started if for you to sign a simple form…

Why are these scams so lucrative and who do they target?

Florida has a particularly bad history with AOB scams, and the reason comes from a poorly designed law that the Florida legislature passed in the 1950s. The law states that if anybody sues an insurance company over claims and the insurance company loses, the company must pay both their own and the plaintiffs legal fees. Is the insurance company wins, they still must pay their own legal fees. This creates a one-sided incentive for contractors or other parties to sue and for insurance companies to settle before a lawsuit reaches the courtroom. If a contractor wishes to bill an insurance company much more than a standard rate for their work and the insurance company refuses to pay, a lawsuit would more than likely land the contractor a settlement for their claim. Indeed, the problem has gotten so bad, a plumber in South Florida openly testified that he was given as much as $2,500 in kickbacks from attorneys per claim he could get an AOB form signed for.

These types of lawsuits are only increasing. According to a Tampa Bay Times report, the number of AOB property claims against insurers in 2006 was 405. In 2016, the number reached over 28,000.

Oftentimes, seniors are the ones who are targeted for these scams. Beyond those directly targeted, insurance consumers all across the state pay for this fraud. Insurance premiums in Miami-Dade county are estimated to jump over $6,000 over the next five years, much in part because of insurance fraud.

When insurance companies have to settle, pay legal fees for frivolous lawsuits, or more for claims than the work warrants year after year, those prices are reflected in premiums.

However, until the Florida legislature decides to eliminate the incentives that began this scam in the first place, here are a few things you can do.

Never sign an assignment of benefits form without first thoroughly reviewing the background of the contractor or restoration company who is requesting it. Even after review, discuss with your insurance company or insurance agent if an assignment of benefits is warranted for the complexity or severity of the damage you may have incurred.

Never accept unsolicited surveys, inspections, or repairs. The first thing that happens when you file a claim with your insurance company is for the insurance company to send out an adjuster to assess the damage and authorize repairs. They may recommend a restoration company or you may be left to choose one of your own.

It is always best to keep the benefits you’ve paid for after all of these years as a homeowner. Keep your rights to litigate against an insurance company is you feel you’re being treated unfairly. Awareness is the best hope at curbing these scams from continuing in the future.