Too Much of a Good thing?

by Mark Goldwich

Image courtesy of piff.net

If you have not heard about the “Assignment of Benefits” crisis currently going on in Florida and elsewhere, you are not alone. But just because you haven’t heard about it, or experienced it, doesn’t mean it’s not out there. Assignment of Benefits has been around a long time. Historically, these forms were used by doctors and other medical professionals so they could provide treatment and then seek reimbursement directly from the health insurance companies. Only recently have emergency restoration companies and other contractors begun to use these forms in a similar fashion. Most people have not heard about it, and will not hear about it, until “it” happens to them. Unfortunately, then it may be too late (for them). Fortunately, you are about to take a short course in “it”.

What is “it”? Well, that depends on which “it” you are talking about. The first “it” is the damage that happens when your property suffers a loss from fire, water, storm, or other insured event. When that happens, you usually have a restoration contractor come out to help clean up, dry out, or otherwise assist in getting your property back to normal.

The next “it” is the “standard” Assignment of Benefits form that the restoration contractor asks you to sign “before work can begin”. Now think about it, you just came home to find 3 inches of water throughout your home, all kinds of property was ruined, you scrambled to find an emergency restoration contractor who could come out right away, and they are handing you a form to sign before they begin to suck gallon after gallon of stinky water out of your carpet, walls, cabinets, and so on. Of course you are going to sign it, right? And yes, most people do. Especially when the contractor quickly explains how it is in your best interest, it is done all the time, it is nothing to worry about, and it allows them to go directly to the insurance company for payment instead of you, Darn right it sounds good!

Courtesy of flickr.com

So people sign it. And just to be clear, in many cases, that is last they will ever hear about it. I am not writing this for all those situations that happen to other people. I am writing this for you, so you know enough about the form, the process, and the pros and cons, so if you are ever faced with this situation, at least you will know enough to make an informed decision.

The fact is, for the most part (as far as I can tell), the Assignment of Benefits form is a good thing. It allows your contractor to deal with your insurance company for you, and to bill them directly, and to even sue the insurance company if they don’t pay the whole claim. Otherwise, they would have to bill you, or even take out a lien your property if you couldn’t pay, and then you would have to sue your own insurance company to get the money to pay your contractor. That’s a good thing, right?

Well, you know the old saying, “If something seems too good to be true, it probably is.” This old adage still applies today for a reason. As with many things in life, once word gets out about a “good thing”, it tends to attract a lot of attention, including the attention of profiteers .

So what could be bad about the Assignment of Benefits form? Naturally, that usually depends on the nature and character of the contractor asking you to sign it. The potential downside is if the contractor does a whole bunch of work that is not covered by your insurance (every insurance policy has more exclusions than you can shake a stick at), guess who will not be paying that bill? Hint: The insurance company. Guess who will wind up paying that bill? You (unless the contractor eats it, and the odds of that are slim). And while the Assignment of Benefits form allows the contractor to negotiate the claim (since the claim now belongs to the contractor, not the homeowner), not all contractors have the experience and expertise to effectively settle all these insurance claims. And insurance companies will suggest that contractors are getting the Assignment of Benefits, greatly inflating the claims, and if the insurance company balks at paying right away, the contractor simply hands the file over to an attorney who promptly sues the insurance company.  This creates legal fees that are eventually passed on to consumers in the form of higher premiums.

Image courtesy of pixabay.com

How do insurance companies feel about Assignment of Benefits forms? Here is a quote directly from
www.securityfirstflorida.com): “If your home is damaged, your first thought may be to call a contractor before contacting your insurance company. This can be a costly mistake. There have been an increasing number of homeowners who have unknowingly signed contracts or forms that include Assignment of Benefits agreements. These forms are sometimes provided by contractors, often from damages that are caused during a storm, and must be read carefully. By signing documents with an Assignment of Benefits agreement, you may be allowing the contractor to collect your claim settlement funds directly from your insurance company. This has resulted in homeowners losing control of the claim process and it could mean having to pay amounts beyond what is covered in their policy. The contractor could place a lien on the home, and contractor liens in Florida can be enforced by foreclosure.”

the website of Security First Insurance (

Was that scary enough? Clearly, insurance companies do not like Assignment of Benefits at all. This alone might lead one to think these forms benefit the homeowner (despite the insurance company warning), but it may not be that simple, for the reasons stated above. Combine this with the fact that there are law firms traveling the state (possibly the country), presenting seminars to crowds of contractors, specifically on the use of Assignment of Benefits forms. Naturally, these are the same law firms that would sue the insurance companies on behalf of the contractors who use the Assignment of Benefits forms but fail to settle the insurance claims (whether inflated or not). These attorneys guide the contractors on the use of the forms, caution them on how to act within the law, and ultimately create a stream of lawsuits for the firm.

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What’s the answer? Know what the form is really about, so when you read it, you can have a basic understanding of what you are being asked to sign. Also try to get a feel for the contractor who is asking you to sign the form. They should be able to explain it to you. If they can’t, that is a bad sign. If they try to suggest it says something other than what is says (we have heard some say the form simply allows the contractor on the property, or allows them to communicate with the insurance company), that could be a worse sign. If they stress they know how claims work, and they will cover your deductible for you, or even get you some extra money…while it might sound good, it suggests they are willing to cut corners, or operate outside the law, and I would suggest you find someone else. But if they are open and honest, and you find them to be credible and ethical, and the form does not say anything that makes the hair on the back of your neck stand up, I would sign the form. But still watch what they do and make sure they are not overdoing things. 

One thing is for sure. The insurance companies are very hard at work figuring out ways to beat the Assignment of Benefits dilemma. Stay tuned for further developments, as this is not going away anytime soon. There is simply too much money at stake for all parties involved.

In this article I explained the basics of the Assignment of Benefits form as it is used in property insurance claims, gave some pros and cons, discussed the reasons it has gained attention and usage, as well as explored the potential for abuse. 

Mark Goldwich is president of Gold Star Adjusters, a group of public insurance adjusters dedicated to helping citizens get the maximum settlement for any insurance claim.