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A look at some precautions contractors should take with AOB agreements, P.1

Last time, we began looking at the issue of assignment of benefit claims, and the financial strain they are putting on Florida’s homeowner’s insurance industry. As we noted, one of the big criticisms of assignment of benefits claims is that they open the door for contractors to file fraudulent claims, and ultimately can put the homeowner at risk if the insurance company and the contractor cannot resolve disagreements.

Typically, Assignment of Benefits agreements transfer all insurance rights, benefits and legal claims under the insurance policy to the contractor. This means that the contractor can do what he or she needs to do to take care of the problem without worrying about whether he or she is going to be able to seek compensation under the insurance policy for the work. This can be a good thing, but it is important for contractors to understand the process and take the proper precautions to protect themselves. 

First of all, contractors who enter into Assignment of Benefits agreements should have a clear understanding of what coverage the homeowner is entitled to under the policy. It shouldn’t be automatically assumed that repairs for all damages are covered by the policy. Contractors need to do their due diligence and are well-advised to get in contact with the insurance company to clarify any questions they have on the matter.

Another important step contractors can take to avoid problems in Assignment of Benefits agreements is to wait until the insurance company sends out an adjuster to provide an estimate of the damage costs. Certainly, emergency repairs need to be made in some cases, especially when leaky pipes are at issue, and they should be made, but contractors should be cautious about entering into Assignment of Benefits agreements in connection with what could arguably be classified as non-emergency repairs. This, along with having an understanding of the standard industry costs can help a contractor to better plan for making necessary repairs within costs that will actually be reimbursed by the insurance provider.  

We’ll continue this discussion in our next post. 

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