What Is An AOB Contract?

• WHAT ARE THE RISKS OF AN AOB?

• HOW DO I KNOW IF IT’S AN AOB CONTRACT?

• CAN I CANCEL AN AOB CONTRACT?

After our unusually long hurricane season with Hurricane Ian and Nicole, we know many households sustained damages that need to be evaluated; we know many have or are considering filing claims through their Homeowners Insurance. Sadly, it is common to see Assignment of Benefits (AOB) from contractors. This form is signed by you, as the policyholder, which then allots benefits to the third party. The third party could be water extraction company, roofers, plumbers, etc.; once the document is signed, it gives many of your rights, as the policyholder, to these third party contractors, including being able to sue the insurance company on your behalf. They negotiate the claim, regardless of what you think is fair, and many times negotiate it for their benefit and not the homeowners. It also allows the other party to seek payment from the policyholder’s insurance company directly. 

WHAT ARE THE RISKS OF AN AOB? 

AOB’s have been contributing to the recent exponential rate increases in Florida’s insurance market. This is due to unnecessary litigation with AOB claims; the third party can take legal action against the insurance company and involve the insured. You are not required to sign an AOB to have repairs completed by a contract worker. You can and should file a claim directly with your insurance company, not your contractor; this allows you to control the benefits of your insurance policy throughout the claims process. 

HOW DO I KNOW IF IT’S AN AOB CONTRACT? 

There are precautions you can take prior to signing any contract. If it is an AOB, you will be signing over insurance benefits, and give the vendor the right to negotiate and endorse claim payments. You can read the full Florida Statute for more information.

An AOB will contain the following language: 

YOU ARE AGREEING TO GIVE UP CERTAIN RIGHTS YOU HAVE UNDER YOUR INSURANCE POLICY TO A THIRD PARTY, WHICH MAY RESULT IN LITIGATION AGAINST YOUR INSURER. PLEASE READ AND UNDERSTAND THIS DOCUMENT BEFORE SIGNING IT. YOU HAVE THE RIGHT TO CANCEL THIS AGREEMENT WITHOUT PENALTY WITHIN 14 DAYS AFTER THE DATE THIS AGREEMENT IS EXECUTED, AT LEAST 30 DAYS AFTER THE DATE WORK ON THE PROPERTY IS SCHEDULED TO COMMENCE IF THE ASSIGNEE HAS NOT SUBSTANTIALLY PERFORMED, OR AT LEAST 30 DAYS AFTER THE EXECUTION OF THE AGREEMENT IF THE AGREEMENT DOES NOT CONTAIN A COMMENCEMENT DATE AND THE ASSIGNEE HAS NOT BEGUN SUBSTANTIAL WORK ON THE PROPERTY. HOWEVER, YOU ARE OBLIGATED FOR PAYMENT OF ANY CONTRACTED WORK PERFORMED BEFORE THE AGREEMENT IS RESCINDED. THIS AGREEMENT DOES NOT CHANGE YOUR OBLIGATION TO PERFORM THE DUTIES REQUIRED UNDER YOUR PROPERTY INSURANCE POLICY. 

We encourage our insureds to read their homeowners policy carefully, that way you can be aware of what your responsibilities are after a loss and any restrictions with assigning benefits. You should also be familiar with the preferred vendors or partnered repair companies associated with your insurance carrier. If you have any questions before, contact your insurance company or agent for their assistance. If your contractor has presented you with an AOB, do not feel pressured to sign it. Read it carefully and ask questions you may have for them, do not sign the document if there are substantial blank spaces. 

CAN I CANCEL AN AOB CONTRACT? 

Yes! You can cancel an AOB without any penalties or fees. The cancellation requires a signature from the third party, acknowledging the desire to cancel the agreement. You can cancel at three different points: 

1. Within 14 days after executing the AOB
2. At least 30 days after the date the third-party vendor is scheduled to start work, if that vendor has not already completed a substantial amount of work
3. At least 30 days after executing the AOB, if the AOB does not have a start date for the work and the third-party vendor has not begun substantial work on the property.

We know the claims process can be confusing to navigate. That is why Wiglesworth-Rindom educates those who call us; when these situations occur, we want you to know how to best handle them for yourself.