Originally published by WFTV-9 |
Action 9 exposes what's driving up homeowner's insurance rates and it's not hurricanes.
Instead it's routine plumbing leaks when water damage contractors take over insurance claims and drastically drive up repair costs.
Sarah and Lonnie Zach still have a demolished bathroom five months after a plumbing leak. They blame a restoration company that collected most of their homeowner’s insurance settlement.
“We've been taken for all of our policy,” said Sarah Zach.
Like many water damage contractors, the company wanted the Zachs' to sign a document first.
“Did they explain that contract to you?” asked Todd Ulrich.
“No, they didn't explain anything,” replied Sarah Zach.
It's an Assignment of Benefits form also known as an AOB, giving the contractor complete control of their insurance claim.
They said the company told them to sign it so they can start working. The restoration company did some demolition, sprayed a mold treatment, set up air cleaners then collected $3,000 from their insurer.
“It's just outrageous that they would charge that much for what they did,” said Lonnie Zach.
That didn't leave the Zachs enough insurance money to repair the bathroom.
Now a growing coalition of insurance companies, consumer, and trade groups claim AOB contracts are out of control.
“It's an absolute crisis today,” said Citizens Property Insurance CEO Barry Gilway.
The state's insurer of last resort found its AOB water claims jumped by 50 percent since 2011.
“What consumers don't understand is they pay for the fraud,” said Gilway.
A typical damage claim average is $7,000. An AOB litigated claim soars to $27,000, that’s more than three times as much.
And critics said that contract makes it far harder for insurers to legally challenge the contractor's bill.
“The consumer is going to pay more and more and more for property insurance,” said Gilway.
Just as Florida's hurricane drought was slowing premium increases, Florida's Insurance Commissioner now estimates there will be 10 percent premium increases driven by AOB abuse alone.
“I'm appalled by how someone can get away with doing that to consumers,” said Sarah Zach.
Florida AOB reform legislation failed the past two years, critics will try again next month.
The restoration industry and its attorneys claim consumers need these contracts to fight for the coverage they deserve.