With wildfires raging across the state, the Oregon Division of Financial Regulation (DFR) wants to make sure people are taken care of in the event of a catastrophe and warned of those who may want to take advantage of a vulnerable situation.

One of those ways is through an assignment of benefits (AOB) agreement, which is a contract between a homeowner and a third party that transfers the insurance claim rights or benefits in an insurance policy to the third party. This allows the third party, which is typically a contractor, plumber, roofer, or other construction professional, to file the claim, make decisions about home repairs, and collect insurance payments without involving the homeowner.

DFR stresses that you are not required to enter an AOB with a third party to have repairs done – you can file a claim directly to your insurance company.

An AOB can be a useful tool for getting repairs done, as it allows the repair company to deal directly with an insurance company when negotiating repairs. It also allows the insurer to pay the repair company directly. However, an AOB is a legal contract, so policyholders need to understand the rights they are signing away and make sure the repair company is trustworthy. Here are some reminders:

• With an AOB, the third party, like a roofing company or plumber, may file your claim, make repair decisions, and collect insurance payments without your involvement. They can also sue your insurer, and you can lose your right to mediation.
• Once you have signed an AOB, your insurer only communicates with the third party.
• It is possible the third party may demand a higher claim payment than the insurer offers and then sue the insurer when it denies the claim.

“It is important for homeowners to know their rights and understand what they are agreeing to with an assignment of benefits,” said Andrew R. Stolfi, Oregon insurance commissioner and director of the Department of Consumer and Business Services. “Importantly, you are signing away your right to control many decisions related to the repair of your home. While this arrangement can be a good thing with the right contractor, it can result in a headache if it ends up in the wrong hands.”

DFR reminds homeowners to be diligent and alert for fraud. Home repair fraud is common after a natural disaster, and some contractors may prey on victims in hopes of making a quick buck. It is usually a good idea to do business with local businesses or trusted companies. Check references and talk to your friends and family. You should also always confirm that a contractor is licensed in the state of Oregon. Your insurance company may also have recommendations, and you should get more than one bid for your repairs.

“It is also essential that homeowners protect their investment by only working with contractors that have been licensed with the Construction Contractors Board (CCB),” said Chris Huntington, Oregon CCB administrator. “Homeowners should always visit the CCB website to verify the license and review the history of the contractor they are considering for the job. The CCB provides a variety of resources to help homeowners avoid scams and successfully complete their repair work after any disaster.”

Anyone who has questions or feels they may have been taken advantage of can always contact one of our consumer advocates at 888-877-4894 (toll-free) or through email at dfr.insurancehelp@dcbs.oregon.gov.

For more information about AOB agreements, the National Association of Insurance Commissioners offers additional resources and information. DFR also has resources on understanding homeowners insurance and other insurance tips, including a brochure designed to help homeowners avoid disaster scams.

###

About Oregon DFR: The Division of Financial Regulation protects consumers and regulates insurance, depository institutions, trust companies, securities, and consumer financial products and services. The division is part of the Department of Consumer and Business Services, Oregon’s largest consumer protection and business regulatory agency. Visit dfr.oregon.gov and dcbs.oregon.gov.