How Restorers Use Assignment of Benefits (AOB) to Protect Payments

Handling insurance claims can be one of the trickiest parts of restoration work. From navigating disputes to ensuring timely payments, the process is rarely straightforward. During my conversation with Josh Ehmke, Co-Founder and General Counsel of One Claim Solution (OCS), we talked about how Assignment of Benefits (AOB) can help contractors manage these challenges. Josh shared insights on best practices for using AOB effectively, why documentation is key, how AOB safeguards payments, and the situations where it might not apply. In this article, we’ll dig into what he had to say from his experience working with restorers and as an attorney, breaking it down into actionable steps for contractors like you.

Best Practices for Navigating AOB Effectively

AOB isn’t just about having an agreement—it’s about using it in a way that prevents misunderstandings and disputes. Here are practical tips to make AOB work for you:

1. Split Claims into Phases

• Emergency Services: AOB is most effective for emergency services like water mitigation and mold remediation, where the scope of work evolves as damage is uncovered.
• Reconstruction Work: Reconstruction often requires detailed estimates agreed upon with insurers before starting. Homeowners may request upgrades, which should be handled through change orders or separate agreements.

2. Communicate Clearly with Homeowners

Transparent communication can save you from disputes later:

• Explain What’s Covered: Let homeowners know upfront what AOB covers and what it doesn’t, such as upgrades or non-covered work.
• Discuss Additional Agreements: Make it clear that any upgrades or changes outside the approved scope will require a separate contract.

3. Follow Industry Standards

• Keep your pricing reasonable and in line with industry guidelines. Insurers are more likely to approve claims when charges align with standard practices.

The Role of Documentation in Successful Claims

Good documentation is the backbone of successful claims. Without it, contractors are more likely to face delays, disputes, and unpaid balances.

Why Documentation Matters

• Supports Your Charges: Detailed records make it easier to justify the work you’ve done and the associated costs.
• Prevents Disputes: Clear, thorough documentation leaves less room for insurers or homeowners to question your work.
• Speeds Up the Process: Insurers often request additional details. Having this information ready ensures faster claims processing.

What to Document

• Before-and-After Photos: Visual evidence of the damage and completed work.
• Service Logs: Detailed notes on what was done, when, and by whom.
• Material and Equipment Lists: Itemized lists of equipment and materials used, including time used, quantities, and costs.
• Communication Records: Keep track of all conversations with the homeowner and insurer.

How a Company Like OCS Can Help

Josh explained that One Claim Solution (OCS) works closely with contractors to improve their documentation. By reviewing past claims, they help identify gaps and offer suggestions for better record-keeping. This not only improves claim recovery rates but also protects contractors from liability.

Protecting Contractor Payments with AOB

One of the biggest advantages of AOB is how it ensures contractors get paid for their work. Here’s how AOB protects your payments:

1. Direct Payment from Insurers

AOB guarantees that insurers pay contractors directly, even if funds are mistakenly sent to the homeowner. Without AOB, homeowners might withhold payment, leading to disputes.

2. Holding Insurers Accountable

When an insurer is notified of an AOB, they are legally obligated to honor it. If they fail to do so, contractors can take legal action to recover the payment.

3. Avoiding Negotiation Hassles

AOB removes the need to negotiate payment directly with homeowners, particularly in cases where they attempt to keep part of the insurance payout.

AOB’s Limitations and When It Doesn’t Apply

While AOB is a valuable tool, it’s not effective in every situation. Contractors need to understand its limitations to avoid unnecessary problems.

1. Non-Covered Losses

If an insurer denies a claim because the loss isn’t covered, AOB won’t apply. Always confirm the validity of the claim before starting work.

2. State Restrictions

Some states, like Texas, Florida, and Tennessee, have laws limiting or invalidating AOB for property claims. In these states, contractors must focus on helping homeowners handle claims directly while ensuring strong documentation.

3. Separate Agreements for Additional Work

AOB only covers the services outlined in the agreement. Any upgrades or changes beyond the insurer-approved scope require separate contracts.

Final Thoughts

AOB can be a game-changer for restoration contractors, but it’s not a one-size-fits-all solution. Success with AOB depends on clear agreements, strong documentation, and understanding its limitations. By following best practices, contractors can:

• Simplify the claims process.
• Protect their payments from disputes or delays.
• Avoid unnecessary conflicts with homeowners and insurers.

As Josh put it, “AOB is most powerful when used correctly. It protects contractors, simplifies the process, and ensures you get paid for the work you’ve done.”

READ MORE:

How to Take Before, During & After Photos to Showcase Restoration Work