End home repair contract abuse

Every year, disreputable attorneys and home-repair contractors launch an Assignment of Benefits (AOB) “open season” on home insurance policy holders. Consumers whose homes are damaged by a leaky pipe or storm damage want quick action by repair contractors to mitigate further damage. Some contractors will not proceed unless the owner completes an AOB agreement with the contractor.

If later there is a disagreement over repair costs, the contractor can engage an attorney who will attempt to settle the case. If the case goes to court and the insurer wins the case, under Florida law, the insurer pays the legal fees and cannot recoup fees from the contractor’s attorneys. However, if the contractor’s attorney wins, the insurer still pays all the legal costs, including the contractor’s. These “one-way” legal fees work to extort the insurance company into quick settlement rather than defend against unreasonable claims.

Florida’s Legislature has the opportunity to protect consumers from jumps in insurance premiums caused by these AOB scams. The incidence of AOB water claims rose 46 percent between 2010 and 2015,

The beneficiaries of these scams are a small number of attorneys in league with some contractors. The consumers who assign their insurance benefits to the contractor don’t benefit from the oversized legal fees because they have surrendered their rights. In the absence of this one-way fee scam, the consumers get their home repaired and the contractors get paid for their legitimate work. Ending the one-way fees would bring no downside for consumers.

Legislative action is long overdue. The interests of the insurers and the consumers are aligned against that AOB abuse. This year, it’s time for the Legislature to shut down this unwholesome cabal that escalates costs on every Florida homeowner.

Alan Daley, American Consumer Institute, Florida

This story was originally published March 11, 2017 at 11:00 AM with the headline "End home repair contract abuse."