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

In matters of insurance, Florida often foreshadows what eventually spreads to other states. In this case the news is not good regarding a growing consumer scam called “Assignment of Benefits” or AOB.

To get an idea of what I'm talking about, you may want to view a video from the Consumer Protection Coalition outlining the problem and 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, then spread to automobile insurance and is now a document used by some unprincipled restoration vendors. This has led to the creation of a cottage industry intimidating and defrauding far too many unwitting homeowners into “assigning” away all their rights and proceeds of their homeowner's policy to an emergency restoration contractor. In essence, the AOB document is a lever the unethical contractor will intend to use when their unsubstantiated and inflated charges are brought into question by a property claims adjuster. While Assignment of Benefits is nothing new, the way in which the document is being utilized by dishonest companies in the restoration industry has grown significantly over the past three years.

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

With the insured's signature, the unscrupulous vendor moves quickly, usually compromising any window of opportunity for the insurer to inspect damage or collect evidence. The insurer is billed, on average, three times the typical cost for jobs that are similar in size and scope of work performed. The Insurer reviews the inflated invoice and attempts to negotiate a fair settlement price based on substantiated documentation. However, the unscrupulous vendor does not accept. Often, an attorney is involved from the beginning and armed with the full assignment of the policy benefits, he/she files suit.

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

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

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

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

Too many are trolling neighborhoods, placing door knob hangers on each home advertising a “Free Roof.” Testimony reveals the homeowner is asked to sign a document allowing the roof to be inspected which, like the water mitigation vendor's “work authorization form,” includes the necessary AOB language.

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

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

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

In Florida, as in other states that either are or soon will be afflicted with AOB, I urge lawmakers, insurance companies and consumer groups to work together to protect consumers from the abusive practices. Everyone needs to be involved in this very important reform effort.

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

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 Rytech Inc.

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