You come home after a hard day’s work to find a small river flowing through your kitchen – the result of a plumbing leak. Which of the following is the ideal way to handle this problem?

A. Wait for Mr. Clean to show up and make everything all better

B. Use your smartphone to search for water extraction contractors, and ask the first contractor who answers your call to come clean up the mess pronto!

C. Call the water extraction contractor that your plumber recommends.

D. Contact your insurance company to report the loss so they can refer a licensed, experienced and reputable water extraction contractor to dry out your home.

Unless you have a fairy godmother or magic wand, option A probably isn’t a viable solution for you to consider in this situation. Option D is actually the best first step to take if you have water damage in your home. Unfortunately, many Florida home insurance customers choose options B or C – a decision that can have costly consequences.

Haste could make waste

It’s natural to want to expedite the recovery process – which is why a water extraction contractor is often the first person a homeowner calls after experiencing water damage in their home. Recognizing the stress and urgency of the situation, some water extraction contractors require customers to sign an “Assignment of Benefits” (AOB) clause or form before agreeing to begin work. Other contractors may recommend that customers sign the AOB form so the customer can avoid the “hassle” of dealing with their insurance company.

In some instances, the contractor bills the insurance company for repairs they never made or takes money from the customer and then takes off. Sadly, those are some of the more fortunate AOB scam victims. In the worst-case scenario, if you’ve signed the rights to your entire claim to the water extraction contractor and their bill isn’t paid, the contractor can place a lien on your home for unpaid repair bills – in Florida, those liens are enforceable by foreclosure.

Also: a "free roof replacement" could cost you the roof over your head - AOB scams are a growing trend in the roofing industry, too! 

What is Assignment of Benefits?

An AOB is a clause that, once signed, transfers control of the claim from the customer to the contractor - allowing the contractor to collect any payments directly from the customer's insurance company. This gives the contractor the latitude to perform work before the insurance company has an opportunity to appraise the damage or to exaggerate the extent of the damage – and either situation could lead to disagreements about the settlement amount.

If the insurance company determines that the claim settlement amount is less than the amount of the contractor’s bill, the customer could be on the hook to pay the difference or face the possibility of foreclosing on their home due to a contractor lien. 

Keep calm and stay in control of your claim

First things first: contact your insurance company FIRST in the event of a loss. Not only will this help you avoid dealing with an AOB issue, but thanks to partnerships most insurance companies have in place with reputable water restoration companies, your insurer can probably get a technician to show up at your home quicker than you can if you make the call!

Consider the following suggestions to help you avoid AOB scams:

  • Use your insurance company’s recommended vendor.
  • Do not hire a contractor that requires you to sign an assignment of benefits. The contractor should only require you to sign a work authorization form.
  • Do not sign contracts or forms that you do not fully understand. When in doubt, call your insurance company or agent for an explanation and advice.

Once your home is dry and you're ready to make repairs, what should you do?

  • Continue to be on the lookout for AOB scams - consider the suggestions listed above.
  • Always get written estimates for repair jobs.
  • Research the background of any contractor you're thinking of hiring. Call your local Better Business Bureau to see whether any complaints have been filed against the contractor.
  • Ask your contractor for local references and testimonials, as well as proof of general liability insurance and workers' compensation insurance.