Rytech is a water damage mitigation and mold remediation firmdoing business in major metropolitan areas across the country,including all zip codes in Florida.

In matters of insurance, Florida often foreshadows whateventually spreads to other states. In this case the news is notgood regarding a growing consumer scam called “Assignment ofBenefits” or AOB. 

To get an idea of what I'm talking about, you may want to view avideo from the Consumer Protection Coalition outlining the problemand how widespread and costly it has become to the Sunshine State.You can view the video on YouTube.

LINK: https://www.youtube.com/watch?v=287KnmUf-ys&feature=youtu.be

Assignment of Benefits originated with medical billing, thenspread to automobile insurance and is now a document used by someunprincipled restoration vendors. This has led to the creation of acottage industry intimidating and defrauding far too many unwittinghomeowners into “assigning” away all their rights and proceeds oftheir homeowner's policy to an emergency restoration contractor. Inessence, the AOB document is a lever the unethical contractor willintend to use when their unsubstantiated and inflated charges arebrought into question by a property claims adjuster. WhileAssignment of Benefits is nothing new, the way in which thedocument is being utilized by dishonest companies in therestoration industry has grown significantly over the past threeyears.

EXAMPLE: A failed water supply line floods ahome. The homeowner's first call is to a plumber to fix the leak.The plumber then refers a water mitigation company to the home toperform service. Often not disclosed to the homeowner, the plumberis paid a referral fee by the mitigation vendor they referred,which in some reported instances can be as high as $1,500 perreferral. That vendor assures the homeowner they are there to help,but they cannot start work unless the homeowner signs a workauthorization form which, unbeknownst to the homeowner, containsAOB language granting the water extractor all the proceeds of theirinsurance policy, including the right to sue the insurancecompany.

With the insured's signature, the unscrupulous vendor movesquickly, usually compromising any window of opportunity for theinsurer to inspect damage or collect evidence. The insurer isbilled, on average, three times the typical cost for jobs that aresimilar in size and scope of work performed. The Insurer reviewsthe inflated invoice and attempts to negotiate a fair settlementprice based on substantiated documentation. However, theunscrupulous vendor does not accept. Often, an attorney is involvedfrom the beginning and armed with the full assignment of the policybenefits, he/she files suit.

Far too often the notice of suit is the first notice to theinsurer that there's even been a loss. Florida's residual marketpool, Citizens Property Insurance Company (Citizens), reports thatin some areas 85 percent of its first “notice of loss” are in theform of a lawsuit. The average attorney fee to settle each case isin the neighborhood of $5,000.

And so…the insurer pays and so does everyone else, with higherpremiums!

In Florida, as in many states, water losses are the mostfrequent homeowners claim – well over half of the total annual,non-hurricane losses for most carriers. Imagine the costimplications from millions of annual claims inflated by 300 percentwith add-on attorney fees of an additional $5,000 per claim.

And, that's just water claims. Unfortunately, roofers are alsoinvolved.

Too many are trolling neighborhoods, placing door knob hangerson each home advertising a “Free Roof.” Testimony reveals thehomeowner is asked to sign a document allowing the roof to beinspected which, like the water mitigation vendor's “workauthorization form,” includes the necessary AOBlanguage. 

Every roof inspection, of course, reveals hail damage. Roofershave been caught on video mechanically creating the “hail or wind”damage, which shockingly sometimes occurs to homes with undamagedpool screens. The roof is repaired or replaced, sometimes theinsurer is called beforehand, sometimes not.  Regardless,the insurer is forced to pay to avoid an expensive lawsuit. Not tomention the expenses associated in properly investigating theclaim, and the use of engineering firms to provide a professionalopinion, all driving expenses and indemnity dollars up for theinsurance companies. Ultimately increasing loss severity, which ispassed on to the consumers by means of increased premiums.

The unfortunate impact from both water and roofs is alreadybeing felt with private carriers, reducing their exposure incritical areas and predicted rate increases on Citizenspolicyholders. Recently, Citizens reported that AOB will cause hugerate increases in Southeast Florida, as follows: Dade County, 189%;Broward County, 186%; and, Palm Beach County 165%. These increaseswill apply to premiums that are already the highest in America.

According to the latest reports, AOB will be a billion-dollarproblem in Florida by next year. Yet, the legislature has failed toact on reforms for the last two years, never even allowing thosereforms to be debated on the floor of either chamber.

In Florida, as in other states that either are or soon will beafflicted with AOB, I urge lawmakers, insurance companies andconsumer groups to work together to protect consumers from theabusive practices. Everyone needs to be involved in this veryimportant reform effort. 

If you'd like to learn more about what's going on and what canbe done to stop it, Google “Assignment of Benefits Florida” andvisit some of the following internet sites for moreinformation.

Florida Chamber of Commerce: www.flchamber.com

Consumer Protection Coalition: www.fightfraud.today

Johnson Strategies: www.johnsonstrategiesllc.com

William “Bubba” Ryan is president & CEO of RytechInc.