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Home repair insurance claim fraud hammering Florida

Imagine this: You wake up to find your kitchen flooded from a broken pipe. You frantically call a water extractor who arrives and says, “Don’t worry. Just sign these forms and we’ll handle everything.” 

The truth is, you’ve just signed away control of your insurance claim and may have permitted unscrupulous third parties to inflate the cost of the work. Ultimately, you could be sued or face a lien on your property for the difference between what your insurer legitimately owes the contractor and what was actually billed.

Similar scenarios are playing out daily across Florida, at a cost to homeowners paying higher insurance rates because of exaggerated claims.

At issue are claims filed under what’s called an “assignment of benefits’’ or “AOB” form. The form was designed to allow insurance payments to go directly to the contractor for work performed without the homeowner having to pay money up front.

Unfortunately, assignment of benefits has been abused by some vendors who intentionally keep homeowners in the dark about the nature, cost and status of their claim. Worse, when these contractors present an inflated claim to an insurance company, they sometimes use the AOB form as the basis for suing the insurer on behalf of the homeowner.

The issue will be a key topic addressed during the Florida Chamber of Commerce’s annual Insurance Summit Jan. 26-28 in Orlando. As a member of the House Insurance and Banking Subcommittee, I consider assignment of benefits a significant problem plaguing Florida’s insurance consumers and plan to address it during the upcoming legislative session, which starts in March.

We can’t afford to wait. Although Florida has been fortunate to go nine years without a hurricane affecting insurance rates, we have seen an explosion in claims made by water extraction firms, roofers and other contractors using assignments of benefits to pad their profits.

Former Florida Insurance Consumer Advocate Robin Westcott warned that the issue is driving up homeowners’ insurance rates by about 17 percent annually. In some parts of the state, claims settled with an assignment of benefits form averaged $32,000, nearly triple the amount of claims settled without one.

To make matters worse, state-run Citizens Property Insurance Corp. revealed last year that for every dollar in premium it was collecting in Florida, it was paying out 27 cents in water damage claims. In Miami-Dade County alone, Citizens paid out 51 cents of every dollar on water claims.

By contrast, only 18 cents of every dollar Citizens collected statewide was being set aside to pay claims for a future hurricane. In other words, our state insurer was spending more on water claims than it was on preparing for the next catastrophic storm.

Florida lawmakers are evaluating how to stop this before it gets worse. Possible fixes should allow consumers to remain involved in their own insurance claim while permitting the legitimate use of assignment of benefits.


State Rep. David Santiago, R-Deltona, is a member of the Florida House Insurance & Banking Subcommittee.