direction to pay assignment of benefits

Understanding Direction to Pay: Its Limitations and Recourse Available to You

As a restoration contractor, using Direction to Pay can help you make sure that you receive payment for your work from a homeowner’s insurance carrier. But these arrangements have their limits and challenges. Here’s what Josh Ehmke, General Counsel at One Claim Solutions, had to say about Direction to Pay and when you can use it to your advantage. 

What is Direction to Pay?

Direction to Pay is a request that policyholders can make to their insurers asking them to send payment for services rendered directly to their contractor instead of them. When insurance companies send payments straight to restoration contractors, it simplifies and speeds up the payment process since contractors don’t have to wait for the policyholder to send the insurance payment to them.

Direction to Pay Requests are Not Legally Binding

As great as Direction to Pay seems, it usually isn’t the best solution to the problems that restoration contractors face when dealing with insurers because Direction to Pay requests are not legally binding. Josh describes Direction to Pay as a “polite, simple request that a policyholder can make to the insurance company saying, ‘Hey, go ahead and pay my contractor.’”

In most scenarios, Direction to Pay requests “look good, but, in reality, they are worthless,” Josh says. “They’re not enforceable at all.” Insurance companies can (and often do) say no and choose to pay the policyholder instead.

So how do you, as a restoration contractor, know when asking your customers to make a Direction to Pay Request to their insurers is actually worth it? What can be used as an alternative for this request? Keep reading to see the advice that Josh has for contractors.

Using Assignment of Benefits Instead of Direction to Pay

If you’re a restoration contractor in a state other than Florida or Texas , One Claim Solutions recommends always using Assignment of Benefits instead of Direction to Pay. Assignment of Benefits allows payments to be given directly to restoration contractors. Unlike Direction to Pay, Assignment of Benefits is legally binding. Instead of insurers getting to pick and choose when they want to comply, they are required to abide by the Assignment of Benefits. When contractors can count on carriers sending payment directly to them, it makes the payment process faster and less painful.

The Benefits of Direction to Pay in Florida & Texas

For restoration contractors in Florida and Texas, One Claim Solutions recommends using Direction to Pay because state laws restrict the use of Assignment of Benefits in these states. “D irection to Pay is better than nothing,” Josh says. “It’s still unenforceable, but at least it gives you something to try to direct the payment to you as the contractor.” Sometimes, you’ll get lucky, and insurance carriers will choose to honor the request, saving you the hassle of tracking down the policyholder for payment.

Using the Liens Process When Direction to Pay Fails to Secure Payment

Contractors in Florida and Texas who are struggling to secure payment even after trying to use a Direction to Pay agreement can use the liens process to ensure payment. To secure your right to the liens process, give pre-lien notice to customers at the start of every job. Communicate clearly with your customers about what pre-lien notices and liens are. For advice on how to best explain pre-liens to your customers, read our recent blog post .

For More Legal Advice

Laws surrounding restoration work can be complicated. If you’re a contractor who wants to learn more about how Direction to Pay or Assignment of Benefits can be useful for your business, turn to the restoration industry experts at One Claim Solutions. To get monthly insights on all things restoration, sign up for our newsletter – Claims Corner .

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Connor Trahan

Account executive.

Hi there! I’m Connor, the Account Executive for One Claim. My goal is to guide our contractors through the sales process, ensuring you’re equipped with all the information you need to make your decision and hit the ground running once aboard. We view ourselves as an extension of your business and I strive to make the process an enlightening and consultative one. My career has primarily been focused in software sales over a few different industries but the last few years were spent helping general contractors solve similar problems to what we’re doing here at OCS! Outside of work, I love spending time with my family, cooking and boating during the summer months.

Nicole Liesenfelt

Director, human resources.

Hello! I’m Nicole, and I’m here to champion for our employees, recruit for new talent, and impact culture at One Claim Solution. I find satisfaction in supporting a memorable employee experience and bring innovation, problem solving, and strategic view to the process. Nothing is more important than our people, and a healthy culture is my top priority! I have had the pleasure of building my career in various sectors, specializing in small to medium size firms focused on high-growth. My experience is centered around driving and implementing change, leading high-performing teams, and driving process improvements. I am excited to make an impact at One Claim. Outside of work, my family and I enjoy getting outdoors as much as possible to explore beautiful Colorado!

Elizabeth McGlone

Demand generation manager.

Great to meet you! I’m Elizabeth, and I’m the one behind all the emails and advertisements you’ve been seeing. As the Demand Generation Manager at One Claim Solution, my mission is to connect with contractors like you who need our services. I’m passionate about having an impact on others and I bring a wealth of experience in demand generation and marketing strategy to create moments of delight, curiosity, and education for you.

Prior to One Claim Solution, I had the privilege of building marketing departments from the ground up at companies in a variety of industries, including IT consulting, first protection, and healthcare. Personally, I love being outdoors, playing Dungeons and Dragons and board games, singing, and traveling.

Alisha Yartzoff

Director of contractor success.

Welcome! I’m Alisha, and I’m here to champion your success as the Director of Contractor Success at One Claim. With a passion for helping contractors thrive, I bring a wealth of experience in onboarding, customer service, and account management to ensure your journey with us is nothing short of exceptional.

Prior to joining One Claim, I had the privilege of scaling SMB and Enterprise Customer Success teams at fast-growing SaaS startups. With over six years of experience at companies like Mavenlink, Teamwork, and ServiceTitan, I honed my expertise in building high-performing teams and fostering proactive, consultative relationships. This background has equipped me with a deep understanding of the challenges faced by businesses like yours, and I’m dedicated to helping you overcome them.

Hi there, my name is Eric! I am the Chief Technology Officer here at OCS, spearheading our technical strategy. I have a background in computer science, graduating cum laude from BYU-Idaho with a Bachelor’s degree in Computer Information Technology.

Before coming to One Claim, I served as the Director of Engineering at Slingshot Technology, Inc., a company later acquired by WorkWave in 2021. My professional journey has spanned both emerging startups and established corporations, with a steadfast focus on cultivating high-trust, low bureaucracy teams and innovating technology using agile methodologies.

In my free time, you can find me flying drones, enjoying the outdoors, and spending time with my family.

Hello, my name is Cam, I’m the COO of One Claim Solution! I come from a management consulting background (Bain & Company) and hold an MBA from the University of Michigan. I have worked at a wide variety of organizations, from Fortune 500 to small-cap, in an equally wide variety of industries. I have over 15 years of experience in operations and strategic growth, and I have spent much of my career focused on developing high-performing tech-enabled service organizations through early stage and high growth phases.

Outside of work, my wife Brittny and I have four kids, ages 13 to 6. As residents of Mesa, Arizona, we love to ski and explore the national parks of the southwest!

Hello, my name is Dan, and I am the CEO of One Claim Solution. I am super excited by everything we are doing at OCS to be the market leading insurance billing specialist that advocates on behalf of our restoration contractors. 

My professional experiences are predominantly corporate in nature. My career started at General Electric in finance and accounting. Immediately prior to joining OCS, I spent time as an investor at Bondcliff Partners and management consultant with Bain & Company. I also hold an MBA from the Kellogg School of Management at Northwestern University and got my BS in finance and accounting from Northeastern University.

Outside of the office, I enjoy spending time with my wife, two young children, and our family dog, Whiskey. We live in Charleston, SC and take advantage of the beautiful weather by spending as much time as possible outside at the beach or adventuring around town

Co-Founder and General Counsel

Hi, I’m Josh! In 2016, I co-founded One Claim Solution with my partner Jeremy Traasdahl, and I serve as General Counsel of One Claim Solution. Working in the restoration industry, Jeremy and I saw contractors struggling to get paid quickly and fairly and we knew there was a need for change. We founded One Claim Solution to be this change and it’s been my privilege to see our company grow and to advocate for our clients as general counsel.

Outside of my passion for helping the restoration industry, I enjoy spending time outdoors, fly-fishing, hunting, skiing, and coaching my kids’ baseball teams. I’ve been married to my amazing wife for 20 years and we have a beautiful family of 5 children.

Jeremy Traasdahl

Hey, I’m Jeremy! In 2016, I co-founded One Claim Solution with my partner Josh Ehmke. Working in the restoration industry, Josh and I saw contractors struggling to get paid quickly and fairly and we knew there was a need for change. We founded One Claim Solution to be this change and it’s been my privilege to lead our amazing team.

Prior to One Claim Solution, I started my career as an inside sales rep for Avnet, then moved to Pepsico as a district sales manager. Outside of work, I love spending time with my wife and four children, two boys and two girls!

5 Things That Need To Be in Your Assignment of Benefits

One of the most common defenses raised by defense attorneys in litigation regarding Personal Injury Protection (“PIP”) is to attack the Plaintiff's Assignment of Benefits. Raising a defense on the Assignment of Benefits actually can spur into multiple defenses including, standing and failure to serve a proper demand letter. Also please remember that Standing is a defense that cannot be waived and can be raised at any time during the litigation.

Under Florida Statute 627.736 (The Florida No-Fault Statute) there is a requirement that you send a valid Assignment of Benefits with EVERY demand letter. The statute under section 10 reads: (10) DEMAND LETTER

(a) As a condition precedent to filing any action for benefits under this section, written notice of an intent to initiate litigation must be provided to the insurer. Such notice may not be sent until the claim is overdue, including any additional time the insurer has to pay the claim pursuant to paragraph (4)(b).

(b) The notice must state that it is a “demand letter under s. 627.736 ” and state with specificity:

1. The name of the insured upon which such benefits are being sought, including a copy of the assignment giving rights to the claimant if the claimant is not the insured.

An assignment of benefits is needed in PIP cases because the actual Plaintiff in a PIP case is usually the medical provider and not the patient. Meaning, the court must have a contract that shows that the patient has assigned the rights to sue in return for something else. The something else is, most of the time, the benefit of them not getting billed at this time for the services rendered.

DIRECTION TO PAY ISSUE:

Direction to pay is a term used by Defense attorneys to make the argument that the “Assignment of Benefits” merely just tells the insurance company where to send the checks. They argue that an agreement to send the checks for the services to the medical provider still leaves the rights to sue to the actual patient. The case law on is a “direction to pay” still an assignment varies by judges and courts throughout the State of Florida.

Whenever there is an argument to be made by a Defense attorney they will make it and raise it. So how will this affect your case? While you are arguing with Defense counsel about the standing issue, they will be drafting motions to stop you from winning your case. If they are successful they will even get the case dismissed and you will have to pay their attorney's fees. If you win the hearing on the standing issue, only then can you get to the heart of the issue. This can take months or a year to get these motions heard. This wastes a lot of time and delays your case from settling and delays the money coming into your office. So why deal with that at all?

WHAT NEEDS TO BE IN MY ASSIGNMENT OF BENEFITS?

When I did Defense work, if I saw the below five items were present in the Assignment of Benefits I wouldn't even raise a defense for it. So what are they?

I cannot mention how many times I read an assignment of benefits and see that the provider has this filled out incorrectly. If your business name is Don's Chiropractic Inc., make sure that in the part of your assignment of benefits it states that name. Not Don's Chiropractic, or Dr. Don etc. The best choice on the business name to assign to is the FEIN number you listed in box 23 of the HCFA form. If your business operates under a dba, make sure your assignment has Don's Chiropractic Inc., d/b/a Don's Chiropractic or whatever dba you have. Further, if you have a dba, please make sure it is always up-to-date with the states requirements. Any fault in any of the above will warrant the Defense to file a Motion for Summary Judgment to try to get the case dismissed.

2. THE WORD IRREVOCABLE -

The term irrevocable is important as it shows to the court intent to relinquish. The case law on the subject loves this term and favors the use of this term. Meaning, that the patient cannot at a later time, have revoked the assignment of benefits. This term leaves the courts knowing that this document is the only document in regards to standing.

3. THE TERM “RIGHTS” -

This is the most important word. The courts, in cases where they have found no standing distinguish between the word rights and the word benefits. Those courts see benefits as payments and not the rights to bring suit. If your assignment has the statement “assigns the rights and benefits, including the right to bring suit, to Don's Chiropractic Inc.” you are going to make this attorney very happy and should never see an MSJ on this issue.

4. THE BENEFIT OF NOT BEING BILLED AT THIS TIME FOR THE SERVICES -

In order for a contract to be valid on its face, both parties must do what is known as a “bargained for detriment”. Meaning each side has to give up something and gain something. It doesn't matter how small this is, it just has to be something. In the context of an assignment of benefits the bargained for the detriment of the medical provider giving up the right to collect payments at the time services are rendered in exchange for the right to bring suit against the insurance company if they do not pay fully is sufficient. In return, the patient is giving up their right to bring suit, but gaining the fact they don't have to pay now. A statement in the assignment similar to “In return for patient assigning the rights and benefits under their PIP insurance, Don's Chiropractic Inc. will allow patient to have services rendered without collecting payments at this time.” This portion of the contract is the least raised issue.

5. THE PATIENTS SIGNATURE -

This may seem obvious, but I cannot tell you how many times I see an unsigned AOB. So what does it mean to the defense attorney if the assignment is not signed? It means that it is an unexecuted contract. Meaning it means NOTHING. So can't you just get them to sign it and everything be good? Yes and no. They can sign it and it would suffice, but we have to start the whole legal process over again. Meaning more time and more time waiting to get paid for the claim. Please train your intake staff to make sure the assignment is signed before the person leaves their first visit.

WHAT DO I DO IF I AM MISSING ANY OF THESE FIVE?

Do not freak out. While many defense attorney's catch one of these issues, we are lucky that some are just not that thorough at what they do. Another scenario is that the insurance provider also wants to see these cases resolved and will choose not to pursue  the defense to save them the money and time it takes the defense attorney to fight it. If you think that your assignment is bad , needs changes or is good, give us a call at Dolman Law Group Accident Injury Lawyers, PA at 727-222-6922 or email at [email protected] . We have a dedicated staff to Personal Injury Protection (PIP) cases. They see assignments and argue these types of issues daily. We look forward to speaking with you soon.

Matthew Dolman

Personal injury lawyer.

This article was written and reviewed by Matthew Dolman. Matt has been a practicing civil trial, personal injury, products liability, and mass tort lawyer since 2004. He has successfully fought for more than 11,000 injured clients and acted as lead counsel in more than 1,000 lawsuits. Always on the cutting edge of personal injury law, Matt is actively engaged in complex legal matters, including Suboxone , AFFF , and Ozempic lawsuits.  Matt is a lifetime member of the Million Dollar Advocates Forum and Multi-Million Dollar Advocates Forum for resolving individual cases in excess of $1 million and $2 million, respectively. He has also been selected by his colleagues as a Florida Superlawyer and as a member of Florida’s Legal Elite on multiple occasions. Further, Matt has been quoted in the media numerous times and is a sought-after speaker on a variety of legal issues and topics.

What is an assignment of benefits?

Jim Probasco is an expert in the areas of personal income, saving and investing, banking, home buying, insurance, and more. A Dayton, Ohio-based writer, Jim has written for radio and television, and authored books for parents in arts education opportunities for their children.

The last time you sought medical care, you likely made an appointment with your provider, got the treatment you needed, paid your copay or deductible, and that was it. No paperwork, no waiting to be reimbursed; your doctor received payment from your insurance company and you both went on with your lives.

This is how most people receive health care in the U.S. This system, known as assignment of benefits or AOB, is now being used with other types of insurance, including auto and homeowners coverage . 

What is an assignment of benefits?  

An AOB is a legal agreement that allows your insurance company to directly pay a third party for services performed on your behalf. In the case of health care, it could be your doctor or another medical professional providing care. With a homeowners, renters, or auto insurance claim, the third party could be a contractor, auto repair shop, or other facility.

Assignment of benefits is legal, thanks to a concept known as freedom of contract, which says two parties may make a private agreement, including the forfeiture of certain rights, and the government may not interfere. There are exceptions, making freedom of contract something less than an absolute right. For example, the contract may not violate the law or contain unfair terms.

Not all doctors or contractors utilize AOBs. Therefore, it’s a good idea to make sure the doctor or service provider and you are on the same page when it comes to AOBs before treatment or work begins.

How an AOB works

The function of an AOB agreement varies depending on the type of insurance policy involved, the healthcare provider, contractor, or service provider, and increasingly, state law. Although an AOB is normal in health insurance, other applications of assignment of benefits have now included the auto and homeowners insurance industry.

Because AOBs are common in health care, you probably don’t think twice about signing a piece of paper that says “assignment of benefits” across the top. But once you sign it, you’re likely turning over your right to deal with your insurance company regarding service from that provider. Why would you do this? 

According to Dr. David Berg of Redirect Health , the reason is simple: “Without an AOB in place, the patient themselves would be responsible for paying the cost of their service and would then file a claim with their insurance company for reimbursement.”

With homeowners or auto insurance, the same rules apply. Once you sign the AOB, you are effectively out of the picture. The contractor who reroofs your house or the mechanic who rebuilds your engine works with your insurance company by filing a claim on your behalf and receiving their money without your help or involvement.

“Each state has its own rules, regulations, and permissions regarding AOBs,” says Gregg Barrett, founder and CEO of WaterStreet , a cloud-based P&C insurance administration platform. “Some states require a strict written breakdown of work to be done, while others allow assignment of only parts of claims.” 

Within the guidelines of the specific insurance rules for AOBs in your state, the general steps include:

• You and your contractor draw up an AOB clause as part of the contract.
• The contract stipulates the exact work that will be completed and all necessary details.
• The contractor sends the completed AOB to the insurance company where an adjuster reviews, asks questions, and resolves any discrepancies.
• The contractor’s name (or that of an agreed-upon party) is listed to go on the settlement check.

After work is complete and signed off, the insurer will issue the check and the claim will be considered settled.

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Example of an assignment of benefits  

If you’re dealing with insurance, how would an AOB factor in? Let’s take an example. “Say you have a water leak in the house,” says Angel Conlin, chief insurance officer at Kin Insurance . “You call a home restoration company to stop the water flow, clean up the mess, and restore your home to its former glory. The restoration company may ask for an assignment of benefits so it can deal directly with the insurance company without your input.”

In this case, by eliminating the homeowner, whose interests are already represented by an experienced insurance adjustor, the AOB reduces redundancy, saves time and money, and allows the restoration process to proceed with much greater efficiency.

When would you need to use an assignment of benefits?  

An AOB can simplify complicated and costly insurance transactions and allow you to turn these transactions over to trusted experts, thereby avoiding time-consuming negotiations. 

An AOB also frees you from paying the entire bill upfront and seeking reimbursement from your insurance company after work has been completed or services rendered. Since you are not required to sign an assignment of benefits, failure to sign will result in you paying the entire medical bill and filing for reimbursement. The three most common uses of AOBs are with health insurance, car insurance, and homeowners insurance.

Assignment of benefits for health insurance

As discussed, AOBs in health insurance are commonplace. If you have health insurance, you’ve probably signed AOBs for years. Each provider (doctor) or practice requires a separate AOB. From your point of view, the big advantages of an AOB are that you receive medical care, your doctor and insurance company work out the details and, in the event of a disagreement, those two entities deal with each other. 

Assignment of benefits for car owners

If your car is damaged in an accident and needs extensive repair, the benefits of an AOB can quickly add up. Not only will you have your automobile repaired with minimal upfront costs to you, inconvenience will be almost nonexistent. You drop your car off (or have it towed), wait to be called, told the repair is finished, and pick it up. Similar to a health care AOB, disagreements are worked out between the provider and insurer. You are usually not involved.

Assignment of benefits for homeowners  

When your home or belongings are damaged or destroyed, your primary concern is to “return to normal.” You want to do this with the least amount of hassle. An AOB allows you to transfer your rights to a third party, usually a contractor, freeing you to deal with the crisis at hand.

When you sign an AOB, your contractor can begin immediately working on damage repair, shoring up against additional deterioration, and coordinating with various subcontractors without waiting for clearance or communication with you.

The fraud factor

No legal agreement, including an AOB, is free from the possibility of abuse or fraud. Built-in safeguards are essential to ensure the benefits you assign to a third party are as protected as possible.

In terms of what can and does go wrong, the answer is: plenty. According to the National Association of Mutual Insurance Companies (NAMICs), examples of AOB fraud include inflated invoices or charges for work that hasn’t been done. Another common tactic is to sue the insurance company, without the policyholder’s knowledge or consent, something that can ultimately result in the policyholder being stuck with the bill and higher insurance premiums due to losses experienced by the insurer.

State legislatures have tried to protect consumers from AOB fraud and some progress has been made. Florida, for example, passed legislation in 2019 that gives consumers the right to rescind a fraudulent contract and requires that AOB contracts include an itemized description of the work to be done. Other states, including North Dakota, Kansas, and Iowa have all signed NAMIC-backed legislation into law to protect consumers from AOB fraud.

The National Association of Insurance Commissioners (NAIC), offers advice for consumers to help avoid AOB fraud and abuse:

• File a claim with your insurer before you hire a contractor. This ensures you know what repairs need to be made.
• Don’t pay in full upfront. Legitimate contractors do not require it.
• Get three estimates before selecting a contractor.
• Get a full written contract and read it carefully before signing.
• Don’t be pressured into signing an AOB. You are not required to sign an AOB.

Pros and cons of an assignment of benefits  

The advantages and disadvantages of an AOB agreement depend largely on the amount and type of protection your state’s insurance laws provide.  

• An AOB frees you from paying for services and waiting for reimbursement from your insurer
• Some people appreciate not needing to negotiate with their insurer
• You are not required to sign an AOB.
• Signing an AOB could make you the victim of a scam without knowing it until your insurer refuses to pay
• An AOB doesn’t free you from the ultimate responsibility to pay for services rendered, which could drag you into expensive litigation if things go south
• Any AOB you do sign is legally binding

The takeaway  

An AOB, as the health insurance example shows, can simplify complicated and costly insurance transactions and help consumers avoid time-consuming negotiations. And it can save upfront costs while letting experts work out the details.

It can also introduce a nightmare scenario laced with fraud requiring years of costly litigation. Universal state-level legislation with safeguards is required to avoid the latter. Until that is in place, your best bet is to work closely with your insurer when signing an AOB. Look for suspicious or inflated charges when negotiating with contractors, providers, and other servicers.

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Assignment of Benefits Awareness

• April 13, 2018

The Consumer Protection Coalition is an insurance front group located in Florida. The Consumer Protection Coalition tries to prejudice the public against trial lawyers. Read this post. It describes how “billboard trial lawyers” and “shady repair firms” are taking advantage of consumers by using the  Assignment of Benefits to force insurance companies to pay repair bills. Let’s unpack this concept, so the public truly understands what is happening.

When people buy insurance, they want protection. The goal is that, when bad things happen, your insurance company will step in and say, “No problem, we have you covered.” This works for anything you insure — your car, your jewelry, or your home. The problem is that insurance companies rarely work for their insured . Insurance companies work for themselves . Their function is to take in insurance payments, called premiums. The insurance companies make money by taking in these premiums. They lose money when people try to collect on their insurance policies by making claims for damages.

In other words, the insurance companies’ game is to take in premium dollars and NOT pay out damages. Homeowner’s insurance is a prime example of the game in action. Every year that there isn’t a hurricane or bad storm , the insurance companies win big. They collect millions of dollars in premium payments, they invest the money they collect, and they make huge sums of money off those premium dollars. Few, if any, insurance companies ever return even a portion of the premiums at the end of the year,  saying, “Hey, you didn’t use your insurance this year. That means you paid for nothing, so here’s some money back.” Oh no, they don’t do that all! They just send you a nice fat bill for next year’s premium.

Assignment of Benefits vs. Direction to Pay

Now, we need to understand what an Assignment of Benefits is and why one is executed. We also need to look at what a Direction to Pay is and why it’s no longer used. An Assignment of Benefits (AOB) is a legal document that gives to another person all the rights you have to some benefit. When it comes to insurance, the “benefit” is the money you are allowed to collect under a claim. When you give someone an insurance AOB, you are basically saying, “Here. You can have all my ‘rights’ under my insurance policy.” Therefore, an insurance AOB is a very powerful document. It allows the holder to bill the insurance company, make a claim, and sue the insurance company if the company doesn’t pay. A Direction to Pay (DPT) is simpler; it doesn’t confer any rights to the insurance benefit. A DPT only allows the holder to make a claim on behalf of the insured.

Why would a person want to sign an AOB instead of a DPT? The reason is simple: Insurance companies continue to underpay claims . They fight over value. They fight over whether or not there is coverage. They fight over the age of the damage, questioning the relationship between the hurricane and the need for a new roof. They fight, and they fight, and then they fight some more. That is their modus operandi , because the longer they hold the money, the more they earn from their investment of your premium dollars. The longer an insurance company holds the money, the more frustrated the insured gets by not getting the repairs done. The longer the insurance company holds the money, the more money the company makes and the less money the company pays the insured. Insurance companies are in the business of pushing back against anyone who makes a claim. Consumers are not in the business of collecting insurance proceeds. Consumers usually have jobs and kids and lives. The insurance game is a hardship for consumers. It is a hassle. It is a huge frustration. And the insurance companies know this — so the insurance companies intentionally make the claims process difficult . That’s a fact.

Instead of facing the battle themselves, consumers can give their rights to contractors or lawyers who force the insurance companies to pay what is due and owed . By signing an AOB, the consumer gives the job of getting the money from the insurance company to the contractor or lawyer. As for the contractor, he/she is simply a roofer, plumber or trade worker who wants to get paid for the work he/she performs — and who also doesn’t want to hassle with the insurance industry — so he/she will take a signed AOB and hire a lawyer to get the bill paid. The lawyer will do this on a contingency basis because the lawyer knows if he/she wins the case, the insurance company will pay his/her fee.

All this goes on without the insurance policyholder being hassled at all. You can save yourself the fight, get your roof fixed, tell your insurance company to pay the bill and go to sleep comfortably in your bed. This is why a consumer will sign an AOB vs. a DPT: With an AOB, the consumer gets the needed benefit right away and he/she avoids getting into a lawsuit with the insurance company. A DPT forces the consumer to be the named party — to run all the risks and spend all the time of litigation.

In closing, do find a reputable contractor to fix your home. Do choose a respected lawyer to help with your homeowner’s insurance claim. But  don’t be afraid of an AOB . It isn’t necessary for you to keep the lawsuit. It is far better for you to give it away in trade for getting your insurance benefit up front.

Contact the attorneys at the  LaBovick Law Group today for a free consultation regarding your Florida homeowner’s insurance claim. And yes, all property damage insurance cases are completed on a contingency basis — which means, we don’t get paid unless we get money for you!

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Assignment of Benefits for Contractors: Pros & Cons of Accepting an AOB

22 articles

Insurance , Restoration , Slow Payment

When a property owner files an insurance claim to cover a restoration or roofing project, the owner typically deals directly with the insurance company. They may not have the funds available to pay the contractor out of pocket, so they’re counting on that insurance check to cover the construction costs.

But insurance companies often drag their feet, and payments can take even longer than normal. Contractors often wish they could simply deal with the insurance company directly through an assignment of benefits. In some circumstances, an AOB can be an effective tool that helps contractors collect payment faster — but is it worth it?

In this article, we’ll explain what an assignment of benefits is, and how the process works. More importantly, we’ll look at the pros and cons for restoration and roofing contractors to help you decide if an AOB is worth it . 

What is an assignment of benefits? 

An assignment of benefits , or AOB, is an agreement to transfer insurance claim rights to a third party. It gives the assignee authority to file and negotiate a claim directly with the insurance company, without involvement from the property owner. 

An AOB also allows the insurer to pay the contractor directly instead of funneling funds through the customer. AOBs take the homeowner out of the claims equation.

Here’s an example: A property owner’s roof is damaged in a hurricane. The owner contacts a restoration company to repair the damage, and signs an AOB to transfer their insurance rights to the contractor. The contractor, now the assignee, negotiates the claim directly with the insurance company. The insurer will pay the claim by issuing a check for the repairs directly to the restoration contractor. 

Setting up an AOB

A property owner and contractor can set up an assignment of benefits in two steps: 

• The owner and the contractor sign an AOB agreement
• The contractor sends the AOB to the insurance company

Keep in mind that many states have their own laws about what the agreement can or should include .

For example, Florida’s assignment of benefits law contains relatively strict requirements when it comes to an assignment of benefits: 

• The AOB agreements need to be in writing. The agreement must contain a bolded disclosure notifying the customer that they are relinquishing certain rights under the homeowners policy. You can’t charge administrative fees or penalties if a homeowner decides to cancel the AOB. 
• The AOB must include an itemized, per-unit breakdown of the work you plan to do. The services can only involve how you plan to make repairs or restore the home’s damage or protect the property from any further harm. A copy must be provided to the insurance company. 
• A homeowner can rescind an AOB agreement within 14 days of signing, or within 30 days if no work has begun and no start date was listed for the work. If a start date is listed, the 30-day rule still applies if substantial progress has not been made on the job. 

Before signing an AOB agreement, make sure you understand the property owner’s insurance policy, and whether the project is likely to be covered.

Learn more – Assignment of Benefits: Ultimate Guide for Contractors & Policyholders

Pros & cons for contractors

It’s smart to do a cost-benefit analysis on the practice of accepting AOBs. Listing pros and cons can help you make a logical assessment before deciding either way. 

Pro: Hiring a public adjuster

An insurance carrier’s claims adjuster will inspect property damage and arrive at a dollar figure calculated to cover the cost of repairs. Often, you might feel this adjuster may have overlooked some details that should factor into the estimate. 

If you encounter pushback from the insurer under these circumstances, a licensed, public adjuster may be warranted. These appraisers work for the homeowner, whose best interests you now represent as a result of the AOB. A public adjuster could help win the battle to complete the repairs properly. 

Pro: More control over payment

You may sink a considerable amount of time into preparing an estimate for a customer. You may even get green-lighted to order materials and get started. Once the ball starts rolling, you wouldn’t want a customer to back out on the deal. 

Klark Brown , Co-founder of The Alliance of Independent Restorers, concedes this might be one of the very situations in which an AOB construction agreement might help a contractor. “An AOB helps make sure the homeowner doesn’t take the insurance money and run,” says Brown.  

Pro: Build a better relationship with the homeowner

A homeowner suffers a substantial loss and it’s easy to understand why push and pull with an insurance company might be the last thing they want to undertake. They may desire to have another party act on their behalf. 

As an AOB recipient, the claims ball is now in your court. By taking some of the weight off a customer’s shoulders during a difficult period, it could help build good faith and further the relationship you strive to build with that client. 

Learn more : 8 Ways for Contractors to Build Trust With a Homeowner

Con: It confuses payment responsibilities

Even if you accept an AOB, the property owner still generally bears responsibility for making payment. If the insurance company is dragging their feet, a restoration contractor can still likely file a mechanics lien on the property .

A homeowner may think that by signing away their right to an insurance claim, they are also signing away their responsibility to pay for the restoration work. This typically isn’t true, and this expectation could set you up for a more contentious dispute down the line if there is a problem with the insurance claim. 

Con: Tighter margins

Insurance companies will want repairs made at the lowest cost possible. Just like you, carriers run a business and need to cut costs while boosting revenue. 

While some restoration contractors work directly with insurers and could get a steady stream of work from them, Brown emphasizes that you may be sacrificing your own margins. “Expect to accept work for less money than you’d charge independently,” he adds. 

The takeaway here suggests that any contractor accepting an AOB could subject themselves to the same bare-boned profit margins. 

Con: More administrative work

Among others, creating additional administrative busywork is another reason Brown recommends that you steer clear of accepting AOBs. You’re committing additional resources while agreeing to work for less money. 

“Administrative costs are a burden,” Brown states. Insurers may reduce and/or delay payments to help their own bottom lines. “Insurers will play the float with reserves and claims funds,” he added. So, AOBs can be detrimental to your business if you’re spending more while chasing payments. 

Con: Increase in average collection period

Every contractor should use some financial metrics to help gauge the health of the business . The average collection period for receivables measures the average time it takes you to get paid on your open accounts. 

Insurance companies aren’t known for paying claims quickly. If you do restoration work without accepting an AOB, you can often take action with the homeowner to get paid faster. When you’re depending on an insurance company to make your payment, rather than the owner, collection times will likely increase.

The literal and figurative bottom line is: If accepting assignment of benefits agreements increases the time it takes to get paid and costs you more in operational expense, these are both situations you want to avoid. 

Learn more: How to calculate your collection effectiveness 

AOBs and mechanics liens

A mechanics lien is hands down a contractor’s most effective tool to ensure they get paid for their work. Many types of restoration services are protected under lien laws in most states. But what happens to lien rights when a contractor accepts an assignment of benefits? 

An AOB generally won’t affect a contractor’s ability to file a mechanics lien on the property if they don’t receive payment. The homeowner is typically still responsible to pay for the improvements. This is especially true if the contract involves work that wasn’t covered by the insurance policy. 

However, make sure you know the laws in the state where your project is located. For example, Florida’s assignment of benefits law, perhaps the most restrictive in the country, appears to prohibit an AOB assignee from filing a lien. 

Florida AOB agreements are required to include language that waives the contractor’s rights to collect payment from the owner. The required statement takes it even further, stating that neither the contractor or any of their subs can file a mechanics lien on the owner’s property. 

On his website , Florida’s CFO says: “The third-party assignee and its subcontractors may not collect, or attempt to collect money from you, maintain any action of law against you, file a lien against your property or report you to a credit reporting agency.”

That sounds like a contractor assignee can’t file a lien if they aren’t paid . But, according to construction lawyer Alex Benarroche , it’s not so cut-and-dry.

“Florida’s AOB law has yet to be tested in court, and it’s possible that the no-lien provision would be invalid,” says Benarroche. “This is because Florida also prohibits no-lien clauses in a contract. It is not legal for a contractor to waive their right to file a lien via an agreement prior to performance.” 

Learn more about no-lien clauses and their enforceability state-by-state

Remember that every state treats AOBs differently, and conflicting laws can create additional risk. It’s important to consult with a construction lawyer in the project’s state before accepting an assignment of benefits. 

Best practices for contractors 

At the end of the day, there are advantages and disadvantages to accepting an assignment of benefits. While it’s possible in some circumstances that an AOB could help a contractor get paid faster, there are lots of other payment tools that are more effective and require less administrative costs. An AOB should never be the first option on the table . 

If you do decide to become an assignee to the property owner’s claim benefits, make sure you do your homework beforehand and adopt some best practices to effectively manage the assignment of benefits process. You’ll need to keep on top of the administrative details involved in drafting AOBs and schedule work in a timely manner to stay in compliance with the conditions of the agreement. 

Make sure you understand all the nuances of how insurance works when there’s a claim . You need to understand the owner’s policy and what it covers. Home insurance policy forms are basically standardized for easy comparisons in each state, so what you see with one company is what you get with all carriers. 

Since you’re now the point of contact for the insurance company, expect more phone calls and emails from both clients and the insurer . You’ll need to have a strategy to efficiently handle ramped-up communications since the frequency will increase. Keep homeowners and claims reps in the loop so you can build customer relationships and hopefully get paid faster by the insurer for your work.

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Assignment of benefits

Assignment of benefits is a legal agreement where a patient authorizes their healthcare provider to receive direct payment from the insurance company for services rendered.

Boost patient experience and your bottom line by automating patient cost estimates, payer underpayment detection, and contract optimization in one place.

What is Assignment of Benefits?

Assignment of benefits (AOB) is a crucial concept in the healthcare revenue cycle management (RCM) process. It refers to the legal transfer of the patient's rights to receive insurance benefits directly to the healthcare provider. In simpler terms, it allows healthcare providers to receive payment directly from the insurance company, rather than the patient being responsible for paying the provider and then seeking reimbursement from their insurance company.

Understanding Assignment of Benefits

When a patient seeks medical services, they typically have health insurance coverage that helps them pay for the cost of their healthcare. In most cases, the patient is responsible for paying a portion of the bill, known as the copayment or deductible, while the insurance company covers the remaining amount. However, in situations where the patient has assigned their benefits to the healthcare provider, the provider can directly bill the insurance company for the services rendered.

The assignment of benefits is a legal agreement between the patient and the healthcare provider. By signing this agreement, the patient authorizes the healthcare provider to receive payment directly from the insurance company on their behalf. This ensures that the provider receives timely payment for the services provided, reducing the financial burden on the patient.

Difference between Assignment of Benefits and Power of Attorney

While the assignment of benefits may seem similar to a power of attorney (POA) in some respects, they are distinct legal concepts. A power of attorney grants someone the authority to make decisions and act on behalf of another person, including financial matters. On the other hand, an assignment of benefits only transfers the right to receive insurance benefits directly to the healthcare provider.

In healthcare, a power of attorney is typically used in situations where a patient is unable to make decisions about their medical care. It allows a designated individual, known as the healthcare proxy, to make decisions on behalf of the patient. In contrast, an assignment of benefits is used to streamline the payment process between the healthcare provider and the insurance company.

Examples of Assignment of Benefits

To better understand how assignment of benefits works, let's consider a few examples:

Sarah visits her primary care physician for a routine check-up. She has health insurance coverage through her employer. Before the appointment, Sarah signs an assignment of benefits form, authorizing her physician to receive payment directly from her insurance company. After the visit, the physician submits the claim to the insurance company, and they reimburse the physician directly for the covered services.

John undergoes a surgical procedure at a hospital. He has health insurance coverage through a private insurer. Prior to the surgery, John signs an assignment of benefits form, allowing the hospital to receive payment directly from his insurance company. The hospital submits the claim to the insurance company, and they reimburse the hospital for the covered services. John is responsible for paying any copayments or deductibles directly to the hospital.

Mary visits a specialist for a specific medical condition. She has health insurance coverage through a government program. Mary signs an assignment of benefits form, granting the specialist the right to receive payment directly from the government program. The specialist submits the claim to the program, and they reimburse the specialist for the covered services. Mary is responsible for any applicable copayments or deductibles.

In each of these examples, the assignment of benefits allows the healthcare provider to receive payment directly from the insurance company, simplifying the billing and reimbursement process for both the provider and the patient.

Assignment of benefits is a fundamental concept in healthcare revenue cycle management. It enables healthcare providers to receive payment directly from the insurance company, reducing the financial burden on patients and streamlining the billing process. By understanding the assignment of benefits, patients can make informed decisions about their healthcare and ensure that their providers receive timely payment for the services rendered.

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Related terms, quality payment program (qpp).

Quality Payment Program (QPP) is a Medicare initiative that rewards eligible clinicians for providing high-quality care through two tracks: Merit-based Incentive Payment System (MIPS) and Advanced Alternative Payment Models (APMs).

Charge code

Charge code is a unique alphanumeric identifier assigned to a specific medical service or procedure, used for billing and reimbursement purposes in healthcare revenue cycle management (RCM).

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• Construction Accidents

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Assignment of benefits: what you need to know.

• August 17, 2022
• Steven Schwartzapfel

Insurance can be useful, but dealing with the back-and-forth between insurance companies and contractors, medical specialists, and others can be a time-consuming and ultimately unpleasant experience. You want your medical bills to be paid without having to act as a middleman between your healthcare provider and your insurer.

However, there’s a way you can streamline this process. With an assignment of benefits, you can designate your healthcare provider or any other insurance payout recipient as the go-to party for insurance claims. While this can be convenient, there are certain risks to keep in mind as well.

Below, we’ll explore what an assignment of insurance benefits is (as well as other forms of remediation), how it works, and when you should employ it. For more information, or to learn whether you may have a claim against an insurer, contact Schwartzapfel Lawyers now at 1-516-342-2200 .

What Is an Assignment of Benefits?

An assignment of benefits (AOB) is a legal process through which an insured individual or party signs paperwork that designates another party like a contractor, company, or healthcare provider as their insurance claimant .

Suppose you’re injured in a car accident and need to file a claim with your health insurance company for medical bills and related costs. However, you also need plenty of time to recover. The thought of constantly negotiating between your insurance company, your healthcare provider, and anyone else seems draining and unwelcome.

With an assignment of benefits, you can designate your healthcare provider as your insurance claimant. Then, your healthcare provider can request insurance payouts from your healthcare insurance provider directly.

Through this system, the health insurance provider directly pays your physician or hospital rather than paying you. This means you don’t have to pay your healthcare provider. It’s a streamlined, straightforward way to make sure insurance money gets where it needs to go. It also saves you time and prevents you from having to think about insurance payments unless absolutely necessary.

What Does an Assignment of Benefits Mean?

An AOB means that you designate another party as your insurance claimant. In the above example, that’s your healthcare provider, which could be a physician, hospital, or other organization.

With the assignment of insurance coverage, that healthcare provider can then make a claim for insurance payments directly to your insurance company. The insurance company then pays your healthcare provider directly, and you’re removed as the middleman.

As a bonus, this system sometimes cuts down on your overall costs by eliminating certain service fees. Since there’s only one transaction — the transaction between your healthcare provider and your health insurer — there’s only one set of service fees to contend with. You don’t have to deal with two sets of service fees from first receiving money from your insurance provider, then sending that money to your healthcare provider.

Ultimately, the point of an assignment of benefits is to make things easier for you, your insurer, and anyone else involved in the process.

What Types of Insurance Qualify for an Assignment of Benefits?

Most types of commonly held insurance can work with an assignment of benefits. These insurance types include car insurance, healthcare insurance, homeowners insurance, property insurance, and more.

Note that not all insurance companies allow you to use an assignment of benefits. For an assignment of benefits to work, the potential insurance claimant and the insurance company in question must each sign the paperwork and agree to the arrangement. This prevents fraud (to some extent) and ensures that every party goes into the arrangement with clear expectations.

If your insurance company does not accept assignments of benefits, you’ll have to take care of insurance payments the traditional way. There are many reasons why an insurance company may not accept an assignment of benefits.

To speak with a Schwartzapfel Lawyers expert about this directly, call 1-516-342-2200 for a free consultation today. It will be our privilege to assist you with all your legal questions, needs, and recovery efforts.

Who Uses Assignments of Benefits?

Many providers, services, and contractors use assignments of benefits. It’s often in their interests to accept an assignment of benefits since they can get paid for their work more quickly and make critical decisions without having to consult the insurance policyholder first.

Imagine a circumstance in which a homeowner wants a contractor to add a new room to their property. The contractor knows that the scale of the project could increase or shrink depending on the specifics of the job, the weather, and other factors.

If the homeowner uses an assignment of benefits to give the contractor rights to make insurance claims for the project, that contractor can then:

• Bill the insurer directly for their work. This is beneficial since it ensures that the contractor’s employees get paid promptly and they can purchase the supplies they need.
• Make important decisions to ensure that the project completes on time. For example, a contract can authorize another insurance claim for extra supplies without consulting with the homeowner beforehand, saving time and potentially money in the process.

Practically any company or organization that receives payments from insurance companies may choose to take advantage of an assignment of benefits with you. Example companies and providers include:

• Ambulance services
• Drug and biological companies
• Lab diagnostic services
• Hospitals and medical centers like clinics
• Certified medical professionals such as nurse anesthetists, nurse midwives, clinical psychologists, and others
• Ambulatory surgical center services
• Permanent repair and improvement contractors like carpenters, plumbers, roofers, restoration companies, and others
• Auto repair shops and mechanic organizations

Advantages of Using an Assignment of Benefits

An assignment of benefits can be an advantageous contract to employ, especially if you believe that you’ll need to pay a contractor, healthcare provider, and/or other organization via insurance payouts regularly for the near future.

These benefits include but are not limited to:

• Save time for yourself. Again, imagine a circumstance in which you are hospitalized and have to pay your healthcare provider through your health insurance payouts. If you use an assignment of benefits, you don’t have to make the payments personally or oversee the insurance payouts. Instead, you can focus on resting and recovering.
• Possibly save yourself money in the long run. As noted above, an assignment of benefits can help you circumvent some service fees by limiting the number of transactions or money transfers required to ensure everyone is paid on time.
• Increased peace of mind. Many people don’t like having to constantly think about insurance payouts, contacting their insurance company, or negotiating between insurers and contractors/providers. With an assignment of benefits, you can let your insurance company and a contractor or provider work things out between them, though this can lead to applications later down the road.

Because of these benefits, many recovering individuals, car accident victims, homeowners, and others utilize AOB agreements from time to time.

Risks of Using an Assignment of Benefits

Worth mentioning, too, is that an assignment of benefits does carry certain risks you should be aware of before presenting this contract to your insurance company or a contractor or provider. Remember, an assignment of benefits is a legally binding contract unless it is otherwise dissolved (which is technically possible).

The risks of using an assignment of benefits include:

• You give billing control to your healthcare provider, contractor, or another party. This allows them to bill your insurance company for charges that you might not find necessary. For example, a home improvement contractor might bill a homeowner’s insurance company for an unnecessary material or improvement. The homeowner only finds out after the fact and after all the money has been paid, resulting in a higher premium for their insurance policy or more fees than they expected.
• You allow a contractor or service provider to sue your insurance company if the insurer does not want to pay for a certain service or bill. This can happen if the insurance company and contractor or service provider disagree on one or another billable item. Then, you may be dragged into litigation or arbitration you did not agree to in the first place.
• You may lose track of what your insurance company pays for various services . As such, you could be surprised if your health insurance or other insurance premiums and deductibles increase suddenly.

Given these disadvantages, it’s still wise to keep track of insurance payments even if you choose to use an assignment of benefits. For example, you might request that your insurance company keep you up to date on all billable items a contractor or service provider charges for the duration of your treatment or project.

For more on this and related topic, call Schwartzapfel Lawyers now at 1-516-342-2200 .

How To Make Sure an Assignment of Benefits Is Safe

Even though AOBs do carry potential disadvantages, there are ways to make sure that your chosen contract is safe and legally airtight. First, it’s generally a wise idea to contact knowledgeable legal representatives so they can look over your paperwork and ensure that any given assignment of benefits doesn’t contain any loopholes that could be exploited by a service provider or contractor.

The right lawyer can also make sure that an assignment of benefits is legally binding for your insurance provider. To make sure an assignment of benefits is safe, you should perform the following steps:

• Always check for reviews and references before hiring a contractor or service provider, especially if you plan to use an AOB ahead of time. For example, you should stay away if a contractor has a reputation for abusing insurance claims.
• Always get several estimates for work, repairs, or bills. Then, you can compare the estimated bills and see whether one contractor or service provider is likely to be honest about their charges.
• Get all estimates, payment schedules, and project schedules in writing so you can refer back to them later on.
• Don’t let a service provider or contractor pressure you into hiring them for any reason . If they seem overly excited about getting started, they could be trying to rush things along or get you to sign an AOB so that they can start issuing charges to your insurance company.
• Read your assignment of benefits contract fully. Make sure that there aren’t any legal loopholes that a contractor or service provider can take advantage of. An experienced lawyer can help you draft and sign a beneficial AOB contract.

Can You Sue a Party for Abusing an Assignment of Benefits?

Sometimes. If you believe your assignment of benefits is being abused by a contractor or service provider, you may be able to sue them for breaching your contract or even AOB fraud. However, successfully suing for insurance fraud of any kind is often difficult.

Also, you should remember that a contractor or service provider can sue your insurance company if the insurance carrier decides not to pay them. For example, if your insurer decides that a service provider is engaging in billing scams and no longer wishes to make payouts, this could put you in legal hot water.

If you’re not sure whether you have grounds for a lawsuit, contact Schwartzapfel Lawyers today at 1-516-342-2200 . At no charge, we’ll examine the details of your case and provide you with a consultation. Don’t wait. Call now!

Assignment of Benefits FAQs

Which states allow assignments of benefits.

Every state allows you to offer an assignment of benefits to a contractor and/or insurance company. That means, whether you live in New York, Florida, Arizona, California, or some other state, you can rest assured that AOBs are viable tools to streamline the insurance payout process.

Can You Revoke an Assignment of Benefits?

Yes. There may come a time when you need to revoke an assignment of benefits. This may be because you no longer want the provider or contractor to have control over your insurance claims, or because you want to switch providers/contractors.

To revoke an assignment of benefits agreement, you must notify the assignee (i.e., the new insurance claimant). A legally solid assignment of benefits contract should also include terms and rules for this decision. Once more, it’s usually a wise idea to have an experienced lawyer look over an assignment of benefits contract to make sure you don’t miss these by accident.

Contact Schwartzapfel Lawyers Today

An assignment of benefits is an invaluable tool when you need to streamline the insurance claims process. For example, you can designate your healthcare provider as your primary claimant with an assignment of benefits, allowing them to charge your insurance company directly for healthcare costs.

However, there are also risks associated with an assignment of benefits. If you believe a contractor or healthcare provider is charging your insurance company unfairly, you may need legal representatives. Schwartzapfel Lawyers can help.

As knowledgeable New York attorneys who are well-versed in New York insurance law, we’re ready to assist with any and all litigation needs. For a free case evaluation and consultation, contact Schwartzapfel Lawyers today at 1-516-342-2200 !

Schwartzapfel Lawyers, P.C. | Fighting For You™™

What Is an Insurance Claim? | Experian

What is assignment of benefits, and how does it impact insurers? | Insurance Business Mag

Florida Insurance Ruling Sets Precedent for Assignment of Benefits | Law.com

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