Episode 26 – AOB Reform: Did Consumers Win?

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In the six months since legislative reform, insurance companies report the number of Assignment of Benefit (AOB) claims in Florida are way down as are related lawsuits.  But they’re also seeing new strategies by contractors and their attorneys to work around the reforms.

On the other side, contractors complain that without the “old AOB,” they’re getting shortchanged by insurance companies and homeowners for work they’ve already performed.

Host Lisa Miller, a former deputy insurance commissioner, talks with Tanaz Salehi, an insurance defense attorney, and Mohammad Sherif, a plaintiff attorney, on the reform’s impact, its unintended consequences, and the potential solutions to ongoing claims problems.

pic of Tanaz Salehi

Tanaz Salehi, Esq. Courtesy, Salehi Boyer Lavigne Lombana, P.A.

Pic of Mohammad Sherif

Mohammad Sherif, Partner, Mubarak & Sherif, PLLC


Show Notes

An Assignment of Benefits (AOB) contract is a legal agreement between the contractor and homeowner, which allows the contractor to receive payments directly from insurance companies for work they perform at a policyholder’s home, without the homeowner having to pay money upfront.  In past years, unscrupulous vendors and their lawyers have taken advantage of the AOB to take control of a homeowner’s policy, then inflate the scope and cost of claims and sue the insurance company if it refuses to pay the inflated bills.  The Florida Legislature passed AOB reform in 2019 establishing tighter rules to stem the abuse and fraud, while putting more responsibilities on insurance companies, too.

The reform, in part, revised Florida’s one-way attorney fee system, to make fee awards fairer.  “Insurance carriers have been filing motions to strike plaintiff attorney fees under the new law and have been prevailing in different counties across Florida,” said Salehi, managing shareholder with the Salehi Boyer Lavigne Lombana law firm in Miami.  She represents insurance companies.

Both Salehi and Sherif agree that while the reform is working, as evidenced by the reduction in lawsuits, there are now issues with loopholes being exploited and unintended consequences for both sides.

Host Miller noted reports of various workarounds to the reform law.  These include plaintiff attorneys making bulk deals with contractors to recommend the homeowner hire the attorney upfront to represent them at First Notice of Loss, to avoid using an AOB.  Also, there are reports of some restoration contractors splitting out “Emergency Services” they provide over several days, in order to get around the $3, 000 statutory limitation.

“That ($3,000 cap) applies to emergency mitigation services,” said Salehi.  “That leaves a huge void for the roofing contractors that are now charging maybe ten to twenty times what it actually costs to replace the roof and submitting permits to the county for repairs for a fraction of what they’re charging the insurance companies.”

Sherif said there are bad actors on both sides and lots of misinformation and confusion in the industry about what the reform did and the expectations going forward.  “There are front end desk adjusters at insurance companies who may be overzealous in applying the new law to hold vendors accountable,” said Sherif, a partner with Mubarak & Sherif, a Tampa law firm that focuses predominantly on helping homeowners in the Florida Panhandle with Hurricane Michael claims.

Both Sherif and Salehi agree the reform has had unintended consequences, too, especially for contractors who want to work but want to be guaranteed payment.

“What I’m seeing is a lot of vendors who don’t want to use assignments anymore but who are having difficulty getting paid.  And the expectation has always been that ‘if I can’t go against the insurance company directly, what recourse am I left with as a contractor?’” said Sherif.

Salehi, who also advises contractors, said there are some cases where a contractor will submit an estimate, the insurance company will approve and cut a check to the policyholder, who then doesn’t pay the contractor for the work already performed.    “The carriers were willing to work with him, but it was the insureds who were not turning over the check.  There were other instances where the carriers were not putting his company’s name on the check,” said Salehi, who is also an IICRC-certified water damage technician.

The podcast discusses the AOB alternatives available to help prevent and resolve claims disputes among contractors, policyholders, and insurance companies.  They include the use of a “Direction to Pay” that among other things, allows the insurance company to put the contractor’s name on the claim payment check.  Another form is the “Letter of Protection” that serves as a lien on any monetary proceeds, including but not limited to insurance payouts related to repair work performed.  (See “Links and Resources Mentioned in This Episode” below for examples.)

But even these AOB alternatives are raising questions.  “The more sophisticated vendors are now just removing the assignment language altogether from their contract and just leaving in there the provision that is a direction to pay,” said Sherif.  “But what carriers are seeing is sometimes an additional power of attorney and if they get both of them together, the issue, at least from my perspective, is how is that not an assignment?”

Host Miller, a former Florida deputy insurance commissioner, noted the heightened hassle is discouraging contractors from doing work in areas where they are most desperately needed, such as the Florida Panhandle after Hurricane Michael.   She asked if regulators such as the Florida Department of Financial Services, Office of Insurance Regulation, Department of Business and Professional Regulation, and the Florida Bar are doing enough to police the marketplace.

“The legislative fix is always a possibility, but it’s never a way to deal with the problems in the law as they currently exist,” answered Sherif, a former regulatory and senior litigation attorney for the Florida Office of Insurance Regulation.   “That’s where I think the regulator could have had more involvement and more guidance.”  He and Salehi noted that follow-up enforcement of bad actors and more publicity around such cases would improve accountability.

“We urge all stakeholders here – whether you are an insurance company claims handler, defense or plaintiff attorney, contractor, public adjuster, or regulator – to show personal leadership and openly communicate with one another about issues and offer constructive solutions that are fair to all parties concerned,” concluded host Miller.  “Give me a call and let’s work together on this!”

Links and Resources Mentioned in this Episode

Assignment of Benefits (AOB) (Lisa Miller & Associates)

Key Provisions of 2019 Assignment of Benefits Reform (Lisa Miller & Associates)



Excerpted “Direction to Pay” and “Letter of Protection”

Court Rulings Differ: AOB Attorney Fee Fight Continues:

Checklist of Requirements for AOB Agreements

2020 Bill Watch (Lisa Miller & Associates)

AOB Under Attack (Johnson Strategies Blog, January 9, 2020)

Can a Contractor Negotiate with an Insurer? (by Mohammad Sherif, Esq. in LMA Newsletter of July 1, 2019)

Citizens, OIR Announcing AOB Reform-Related Changes (LMA Newsletter of June 17, 2019)

How Florida’s New AOB Law May be Exploited (LMA Newsletter of May 20, 2019)

New AOB Law: Putting Consumers on Offense (Florida Insurance Roundup podcast, May 13, 2019

Assignment of Benefits Resources & Consumer Alerts (Florida Office of Insurance Regulation)

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