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A look at some precautions contractors should take with AOB agreements, P.2

We’ve been looking in recent posts at the topic of Assignment of Benefits agreements, the risk of over-inflation and fraud, and the need for contractors to take precautions to protect their right to seek compensation under the homeowners policy for repair work provided in connection with an Assignment of Benefits agreement.

One of the reasons it would be important for contractors to investigate such matters before entering into an Assignment of Benefits agreement is that the costs they incur in performing the repair work may be drastically different than the costs estimated by the insurance company. If the insurance adjuster low-balls the estimated cost, the contractor may want to think twice about taking the job since it could mean he or she will run into problems seeking compensation. 

A contractor in such a situation is well-advised to at least communicate with the insurance company about projected costs and seeking compensation. Communication and documentation of such matters can potentially help protect a contractor’s rights.

Another area where communication and documentation is important for contractors is keeping track of the expenses of the repair work. All materials, labor and other expenses associated with repair work should be thoroughly and carefully documented so that the insurance company knows exactly how charges were calculated if it chooses to investigate or challenge the matter. Contractors should expect that expenses which are necessary and fall squarely within the terms of the homeowners policy will be covered by the insurance company.

Contractors should also have a clear understanding of the claims process under the homeowners policy and should be careful to properly submit claim according to that process. This protects contractors from having claims denied based on procedural technicalities.

In cases where the insurance company refuses to pay for necessary repair work and the homeowner cannot pay or refuses to pay, the contractor may be able to file a lien against the home and, if necessary, file a foreclosure action to recuperate the repair expenses. An experienced attorney can be a critical source of advice and advocacy in these cases, and contractors should not hesitate to work with an attorney to protect their rights and interests under Assignment of Benefits agreements. 

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