An assignment of benefits, or AOB, is a legal tool that allows an insurer to directly pay a third party for services performed rather than reimbursing a claimant afterwards. In recent years, insurers have experienced an increase in fraud and abuse of assignment of benefit provisions, resulting in higher costs.
Assignment of rights to collect under an insurance policy after a loss are common. In many cases, homeowners will assign the right to collect to contractors or other service providers following a loss. Vendors soliciting AOBs from policyholders are typically associated with property insurance, auto repair, and personal insurance claims. While such assignment may allow policyholders to make emergency repairs more quickly, the practice has resulted in many homeowners becoming the victims of scam artists and other unscrupulous service providers. Contractors have sought to unilaterally establish the value of the claim and demand payment for inflated invoices. Many contractors also work with attorneys that then sue the insurance company over the claim.
State legislatures have sought to protect insurance consumers from AOB abuse by imposing common sense limitations, and 2019 finally saw some progress. For example, for the past several years, the Florida legislature has sought to put some parameters around the use of assignment of benefits to curtail the explosion of lawsuits filed by contractors and attorneys allegedly on behalf of consumers who knew nothing about the lawsuits. The only beneficiary of such fraud were the unscrupulous lawyers and contractors. In 2019, AOB reform legislation finally passed the Florida legislature, and was signed into law by the governor. Among other things, the new law gives policyholders the right to rescind the contract, and mandates that the assignment include an itemized description of the work to be done. Similarly, governors in North Dakota, Kansas, and Iowa all signed into law NAMIC-backed legislation to protect consumers from abusive assignment of benefit practices.
NAMIC believes in fairness when it comes to the litigation process and supports efforts to protect policyholders from unscrupulous third-party service providers. Given the significant potential for fraud, which raises costs for all consumers, NAMIC is supportive of legislation in the states that prevents the abuse of the assignment of benefits practices.
June 17, 2019 The Florida Office of Insurance Regulation has issued Informational Memorandum OIR-19-02M regarding the recently enacted assignment of... Read more
May 29, 2019 Enacted HB 7065 establishes new guidelines regarding post-loss assignments of benefits under residential and commercial property policies. The law also expressly allows insurers to issue non-assignable policies. NAMIC actively supported this bill. Read more
May 24, 2019 It’s been seven long years in the making, but finally, after years of contentious battle, the people in the white hats... Read more
May 23, 2019 Florida HB 7065, long-awaited assignment of benefits reform, was presented to Gov. Ron DeSantis on May 22. He has until June 6 to sign, veto, or allow the bill to become law... Read more
May 9, 2019 The Florida Legislature adjourned on May 4, and the insurance industry came away with more than just a big win on the assignment-of-benefits reform that passed April 24. HB 7065 has an... Read more