FAQ: Assignment of Benefits (AOB) for Florida Homeowners

In the wake of hurricanes and tropical storms, Florida homeowners often find themselves dealing with significant property damage. This is when Assignment of Benefits (AOB) can become a major concern. While AOB might seem like an easy way to handle repairs quickly, it can lead to costly consequences if you don’t fully understand the process. Here we will address frequently asked questions (FAQ), break down what Assignment of Benefits (AOB) is, how it can be exploited, and how you can protect yourself from fraud, especially in the aftermath of a storm.

What is Assignment of Benefits (AOB)?

Assignment of Benefits, commonly referred to as AOB, happens when a homeowner signs over their insurance claim rights to a contractor. In return, the contractor agrees to handle the repairs. While this may seem convenient, many homeowners don’t realize they are giving up their ability to dispute the contractor’s work, even if it’s incomplete or substandard. This issue has become widespread in Florida, especially after the property damage caused by hurricanes and tropical storms.

How Do Contractors Exploit AOB in Florida?

Here’s a common scenario: After a broken pipe floods your home, a plumber fixes the leak and refers you to a water extraction company. The company promises to handle the cleanup and deal with your insurance directly. Under pressure to avoid mold growth (a serious concern in Florida’s humid climate), you may feel rushed into signing an AOB contract.

Once the contract is signed, the contractor may complete the work before your insurance company can assess the damage. The final bill could be $12,000—far more than the typical $3,500 for water extraction. If your insurer disputes the inflated charges, the contractor might sue for breach of contract and even place a lien on your property. Under Florida law, unpaid bills could potentially lead to foreclosure. Insurance companies often settle these inflated claims to avoid legal battles, which leads to higher premiums for homeowners across the state.

How is AOB Fraud Prevalent After a Hurricane?

In the aftermath of a hurricane, many Florida homeowners are eager to repair their homes quickly. This urgency can make them more vulnerable to AOB scams. Unsolicited contractors often appear offering “free” services or fast repairs, but many will push for an AOB contract to take control of the insurance claim. It’s crucial to be cautious during this time and follow the proper steps to avoid becoming a victim of fraud.

Who are the Biggest Abusers of AOB in Florida?

The most frequent abusers of AOB contracts are water extraction companies and roofing contractors. Roofing contractors often target high-end Florida neighborhoods, offering homeowners a “free roof” for hail damage that might have occurred years ago. Water extraction companies, often recommended by plumbers after a pipe leak or roof damage, also take advantage of Florida’s unpredictable weather patterns.

How Does AOB Fraud Impact Insurance Agents in Florida?

AOB fraud doesn’t just affect homeowners—it also severely impacts Florida insurance agents. It increases loss ratios and prompts insurance carriers to cancel policies or stop offering coverage in high-risk areas, such as Miami-Dade, Broward, and Palm Beach counties. These fraudulent practices contribute to rising property insurance premiums across the state, straining agency relationships with both carriers and vendors. In some cases, water extraction companies offer referral incentives to customer service representatives (CSRs), often without the knowledge of the agency principal.

How Much Does AOB Fraud Cost Florida Homeowners?

AOB-related water damage claims account for over 50% of all non-hurricane losses for many insurance carriers in Florida. For example, Citizens Insurance, Florida’s largest insurer, cited AOB lawsuits as the primary reason for increasing rates by 30% in Southeast Florida and up to 17% statewide in 2015. In Miami-Dade County, more than 56% of premium dollars go toward water damage claims, which significantly contributes to rising insurance costs for Florida homeowners.

What Does O’Quinn Insurance Do to Reduce AOB Fraud?

Here are a few ways O’Quinn Insurance Services agents help combat AOB fraud:

• Avoid recommending vendors who use AOB or offer referral fees.
• Carefully vet vendors and remove any contractor using AOB from your referral list. Work with your carriers to identify trustworthy vendors.
• Educate our team about the risks of AOB. 
• Raise awareness about AOB scams through our website, social media, newsletters and at community events. 

Tips for Florida Homeowners to Avoid AOB Scams

As a Florida homeowner, here’s how you can protect yourself from AOB scams, especially after a hurricane:

• Contact your insurance company first when you experience property damage. They can guide you through the claims process and recommend reputable contractors.
• Ask contractors if they use AOB and always request proof of liability insurance.
• Never sign a contract without fully reading it or understanding its terms. If you’re unsure, reach out to your insurance agent for assistance.
• Be cautious of unsolicited contractors offering “free” services, particularly after storms.

For more advice on how to handle your insurance claims or to review your policy, contact O’Quinn Insurance Services. We are here to help Florida homeowners navigate the complexities of insurance and protect what matters most.