Changes to AOB Law Could Impact Your Next Insurance Claim

Michelle Lau is seeing a lot of her parents lately.

"I have been here for a month trying to help my parents," Lau said.

The former professional poker player turned small business owner flew to South Florida from Las Vegas to help her parents get to the bottom of a months-long dispute with a contractor. It started in mid-October when a water pipe burst inside the Lau's home.

"It flooded the bathroom and the master and it caused mold," Lau said.

They filed a claim with their homeowner's insurance. An independent adjuster came to inspect the home and by early November, work to repair the home was underway. But months later, Michelle says repairs listed on the initial estimate from the contractor, totaling nearly $9,000, were either not done well or not done at all.

"There is no shower pan that exists in the bathroom," Lau said.

What they still owe the contractor is being disputed, but the problems may not have happened if they hadn't signed an assignment of benefits form. An AOB lets contractors get paid directly from the homeowner's insurance. Its use has long been controversial in Florida.

"What ends up happening and we have research at the triple-I to show is that the claims increase significantly in cost," said Sean Kevelighan, the CEO of Insurance Information Institute.

His group found abuse often occurred when inflated bills were denied by Insurance companies and contractors sue the insurance company in court. Using the Florida Department of Financial Service of Process Database, the Information Insurance Institute found between 2013 and 2018 AOB lawsuits in Broward County quintupled and in Miami-Dade they tripled. But in July, a new law went into effect that changes how legal fees are handled in AOB cases and adds new requirements for contractors using AOBs.

Reform advocates hope these changes will result in lower premiums for consumers, but not everyone is convinced.

"I just don’t think that most people have the financial resources that it will require to mitigate their damage fully," attorney Luis Mena said.

Mena says cutting down on AOB fraud is a positive, but the new changes come with some negatives. For example, he says that in some cases homeowners would be required to go through their insurance company to determine who can make repairs and how much they can spend. He fears this could slow down the restoration process following a catastrophic event like a hurricane.

"The carrier is going to be overloaded. People are not going to be able to get the services that they need as timely as they need it, and it is probably going to create more damage, as opposed to curtailing it," Mena said.

The new law also allows a policy holder to rescind an AOB within a certain time if a contractor hasn't done substantial work.

In Lau's case, the contractor placed a lien on their home for non-payment. They are currently disputing that lien and the additional charges.

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