Imagine coming home to find your roof badly damaged, your basement filled with water or your business forced to close after a fire. In the hours and days that follow, you're focused on protecting your family, preventing further damage and getting your property repaired as quickly as possible. Unfortunately, those stressful circumstances can also create opportunities for unscrupulous contractors to pressure property owners into signing assignment of benefits agreements that may not be in their best interest.
An assignment of benefits agreement is a contract that can transfer certain rights related to your insurance claim to a contractor or other third party, allowing them to communicate with your insurer and, in some cases, seek payment directly.
Before signing, make sure you understand exactly what rights you are giving up, as it may reduce your control over how your claim is handled and how repairs are managed.
Assignment of benefit scams are on the rise in New York
While New York has not experienced the same volume of assignment of benefits schemes seen in states like Florida, consumers should be aware of this growing scam. In some cases, contractors acting in bad faith begin contacting property owners shortly after a home or business has been damaged, offering immediate assistance. They may pressure a property owner to sign an assignment of benefits agreement on the spot, promising repairs can begin right away. They may also assure the property owner that they won't have to worry about paperwork or costs because the contractor will “work directly with the insurance company.”
That reassurance may sound convenient, but it can come with significant consequences. Unlike a typical home repair contract, an assignment of benefits agreement can transfer important rights related to an insurance claim. Property owners may not understand they are giving someone else the authority to communicate with their insurer, negotiate aspects of the claim or pursue payment. Such a decision can have lasting financial consequences and should never be made under pressure.
Signing an assignment of benefits agreement without understanding the contract you are signing is like handing someone a signed check and letting them fill in the amount later. In many cases, property owners sign before receiving a detailed scope of work, timeline or cost estimate. If the contractor later submits charges that are significantly higher than expected, the property owner can find themselves responsible for costs they never anticipated. Instead of helping people repair their home or business and move forward, assignment of benefits agreements can lead to unexpected costs, delayed repairs, disputes over insurance claims, and significant financial stress during an already difficult time.
New legislation could help New Yorkers. Here's how
Consumer protection legislation has been introduced to help address this issue. The proposal would establish the New York Property Rehabilitation Protection Act (A10176 by Assemblyman David Weprin and S9368 by state Sen. Jamaal Bailey), adding a new section to the insurance law to help protect homeowners and business owners who suffer property damage. The legislation would limit and prohibit the use of certain assignment of benefits agreements that allow contractors to take control of insurance claims and take advantage of consumers.
Legislation needs to be prioritized to put control back in the hands of property owners. Policyholders should be able to make informed decisions about repairs to their property without pressure or confusion over who controls their insurance claim. By restricting the use of harmful assignment of benefits agreements, public policymakers can help ensure property owners remain at the center of the recovery process and avoid becoming victims of a second disaster — one caused by fraud or abuse rather than the original loss.
You wouldn't sign a blank check, you wouldn't sign a contract without knowing the price and you wouldn't hand a stranger unrestricted control of your finances. The same precautions you would take on your best day are even more important on your worst day.
After a storm or other property loss, don't sign an assignment of benefits agreement until you understand exactly what rights you're giving away.
Cheryl Robinson is president and CEO at NYCM Insurance, a property and casualty insurance company in central New York providing coverage to New York residents and businesses since 1899.
This article originally appeared on Rockland/Westchester Journal News: Insurance scams are on the rise in NY. This law can help | Opinion
