An assignment of benefits (AOB) allows a third party to be paid for services performed for an insured homeowner who would normally be reimbursed by the insurance company directly after making a claim. AOB is commonly used when a homeowner experiences a water loss – such as a leaky pipe, an overflow from a sink, or a damaged appliance – and contacts a contractor or water remediation company for assistance. In the wake of Hurricane Matthew, AOB contractors are out in force.
Most AOB agreements presented to the homeowner allow the contractor to stand in the shoes of the homeowner for insurance collection purposes. Some argue that this legal arrangement allows unscrupulous contractors to overinflate or submit improper claims, causing legal battles between the contractor and the insurance company, with the consumer left out of the picture. While there are arguments in favor and against AOB agreements, the most compelling argument against certain overreaching AOB agreements is where the entire restoration of the insured property is assigned. In this scenario, the insured homeowner is left without sufficient control to ensure the quality of their home restoration. The simple answer is the insured should seek legal counsel when considering whether to sign an assignment of benefits (AOB) contract.