What’s The Problem With The Assignment Of Benefits?
Brian O Sutter
Accident Lawyers
Personal Injury
“Assignment of benefits” is a practice with insurance claims in which a claimant will sign away some of his or her benefits directly to the person or organization who would wind up taking the money anyway. For instance, a person who’s just been through a flood will need a professional cleaning service and someone to repair the foundation, and with the ability to use an assignment of benefits the homeowner can essentially tell the contractors to contact their insurer directly for their money.The Benefits
The best reason for this approach is the fact that it cuts out a lot of the now-unnecessary back-and-forth communication. Without it, a contractor would need to inspect the condition of the home, provide an estimate for the needed work, and then wait for the homeowner to make his or her claim and then deliver the funds. Instead of all that, the homeowner can sign an assignment of benefits release form which allows contractors to place their claims directly with the insurance company and then get straight to work.
The Risks
The biggest problem with the assignment of benefits system is probably the fact that the insurers’ antifraud divisions aren’t quite as good at sniffing out professional grifters who skim off the top as they are at smelling a rat when it’s a private individual. The contractor also has a better chance of getting away with fraud since they aren’t tied directly to the policy in question.
This means a claim based on an assignment of benefits is more likely to get away with fraud than a claim filed by the policyholder personally. Similarly, a contractor is more likely to hire an unscrupulous law firm which is willing to overlook the inflated prices and file a lawsuit that includes the actual homeowner if the insurer refuses to pay. As a result, an increase in higher claims will mean an increase in premiums across the board.
The Remedy
Florida lawmakers are currently considering a bill that will limit Floridians’ access to assignment of benefits with regards to homeowners’ insurance. In particular, contractors with an AoB can’t sue an insurer directly (although the homeowner still can), policyholders must have the right to cancel an AoB within a few days and don’t have to pay a cancellation fee even after that, and the insurer must approve of any costs that overrun the initial estimate.
But while the statistics do seem to indicate some fraud is going on and many of the bill’s provisions make sense, it’s also important to remember that very often when an insurance company gains power to fight fraud it’s at the cost of the people who pay the premiums. Florida’s PIP law is an unfortunate example of this process in action, as every Floridian with PIP insurance can only access the first $2,500 of a $10,000 policy unless an approved physician provides written proof that the person’s injuries are particularly severe.
The insurance industry is a never-ending battle waged between insurers on one side and fraudsters on the other, with unfortunate policyholders going through tough times caught in the middle. It can be all too easy to wind up trampled if you get unlucky, which is why it can really help to hire a personal injury lawyer who can make sure you get the settlement you deserve. An unscrupulous lawyer may cost you money by supporting the unlawful practices of contractors, but an honest lawyer can help you fight against a claims adjuster who’s searching for any excuse to shut your claim down.