New repair contractors billing strategy leaves homeowners on the hook if insurers don’t pay [South Florida Sun-Sentinel]


Imagine receiving an unexpected $ 7,500 an invoice telling you that your payment is more than 30 days past due and that you are responsible for it if your home insurance does not cover it.

It’s the fear that Carla Axelrod experienced after her water heater leaked in September. Insurance experts in Florida warn that this is the result of the latest repair contractors billing strategy that leaves homeowners vulnerable to surprisingly high bills, liens against their homes, and lawsuits if insurers don’t pay.

The strategy is to require homeowners to sign what is called a “payment instruction” and give contractors the right to bill insurance companies directly for their repair services. Sounds convenient, but what customers might not know is that by signing the document, they agree to pay any part of the contractor’s bill that is not paid by the insurer, even if the contractor assured them that the work would be covered by their policy.

The trend is the latest salute in an ongoing battle between contractors and home insurance companies in Florida.

Prior to 2019, many contractors specializing in water dewatering and roofing services required homeowners to sign what is known as an Assignment of Benefits, which allowed contractors to assume the lessee’s right. insurance to sue an insurer for claims. Insurers say this has fostered abuse.

Lawsuits against insurers have skyrocketed, as have insurance costs for all Florida owners.

As a result, the state passed restrictions and consumer protections in 2019 that were intended to curb abuse and runaway costs.

Insurers now argue that contractors are using a document called a payment instruction, also known as a direct payment authorization, and work authorization contracts to avoid complying with the reforms.

Insurers are calling on the state legislature to extend these assignment of benefits restrictions to all contracts authorizing repair of damage covered by property insurance.

Axelrod, a Boca Raton retired, learned the hard way that she was ultimately responsible for paying a $ 7,476 bills a company that got his signature to perform major dewatering services after its aging water heater leaked in September.

Axelrod said she called Roto-Rooter because she wanted a cost estimate for a new water heater.

But one Roto-Rooter The field supervisor who came to her home showed her the results of the humidity tests which he said proved the leak had entered her walls and could lead to mold infestation, a serious health risk. she declared.

“The first thing the field supervisor asked was, ‘Do you have home insurance? I said ‘yes’ and he said’ They will pay for everything except the water heater and the installation. “

He handed her an electronic tablet and told her to sign her name in a box. Then, she said, he told her not to bother calling her insurance company. “He said, ‘I’ll call them.’ “

Later that night Roto-Rooter workers arrived and ripped off the tile baseboards from the bottom of the walls in the areas surrounding the water heater. They installed plastic sheeting and seven machines to remove moisture from the air and its walls. They did not replace the water heater.

Six weeks later, Axelrod received an invoice for Roto-Rooter for $ 7,476 as well as a worryingly worded letter saying that her bill was over 30 days past due and that she should pay it if her insurer did not pay her within 30 days.

Axelrod said she was shocked at the amount of the invoice and asked for an itemized invoice. The services listed on the invoice left her shaking her head: most of the charges were related to the installation and use of the drying machines. But there was also $ 193.44 for “content manipulation”, $ 18.02 to clean your kitchen sink, and $ 182.63 to transport the half-dozen sections of ripped plinths.

She was surprised to see the charges add up $ 304 for removing, resetting and cleaning her refrigerator and dishwasher, which she does not remember.

Roto-Rooter spokespersons interviewed for this story said the appliances must have been removed, reset and cleaned when Axelrod was not in the kitchen. “We don’t charge for the services we don’t provide,” said Jason trace, general manager of the company Fort Lauderdale Office.

Axelrod will not have to pay the Roto-Rooter invoice. After the South Florida Sunshine Sentinel contacted Roto-Rooter and his insurer, Universal Property & Casualty, regarding his situation, a representative from Universal called Axelrod and assured him that the bill would be covered.

And she can use a $ 6,200 check that Universal gave her in September to cover repairs to her home, including replacing baseboards that Roto-Rooter snatch. Axelrod said she was afraid of being forced to give this check to Roto-Rooter, leaving her unable to afford the fixes.

“Posting” reforms increase policyholder risk

Until the adoption of the transfer of benefits reforms in 2019, Axelrod might never have seen the itemized invoice that Roto-Rooter submitted to its insurer, just as policyholders were often not informed when contractors sued on their behalf.

During state legislative hearings on the reforms adopted in 2019, contractors and insurers blamed each other for increased litigation and costs. Contractors complained that insurers were watching their bills and generally offered to pay only a fraction of what was owed.

Insurers said many contractors and lawyers regularly submit fraudulent claims to get as much money as possible.

And while the reforms have been successful in reducing assignments, contractors have turned to Direction to Pay as a way to avoid the 2019 restrictions while still retaining the ability to bill insurers directly, according to insurers.

Consumers walked away with less protection

As a result, consumers who sign Direction to Pay contracts lose the protections built into the 2019 reforms, including immunity from contractor lawsuits and the right to receive a detailed estimate.

Axelrod said she wouldn’t have allowed Roto-Rooter to provide such extensive dewatering services if it had known in advance what the company intended to do.

Under Direction to Pay contracts, customers only have three days to cancel employment agreements. Cession of benefits reforms allow 14 days to cancel.

Axelrod’s contract with Roto-Rooter includes a clause waiving any right of withdrawal.

In addition, the cession of benefits reforms prohibit contractors from attempting to recover from clients any money not paid by insurers, including by filing liens on their homes or suing them in court. No such restriction exists under a payment order agreement.

Other unresolved shortcomings in the 2019 reforms put policyholders at risk, insurers say.

Locke burt, Chairman and CEO of the Ormond Beachbased company Safety insurance first, says consumers who sign Direction to Pay contracts are “actually signing a blank check” to contractors, he said.

Contractors “can assign work to someone else without permission. They can keep the difference (of payment) if they outsource the work to someone else, ”Burt said.

The biggest problem, according to Paul handerhan, president of the consumer-oriented association Federal Association for Insurance Reform, is the “non-disclosure of the scope of work” and what it will cost.

In an email, Tasha carter, the states Consumer advocate in insurance, said she spoke to many consumers who had not been protected after signing Direction to Pay agreements. Some allow contractors to assess the fees of consumers who terminate their contracts, she said.

Although the contracts state that consumers do not subscribe to the benefits of their insurance policies, they operate in much the same way, allowing “a contractor to exercise control over an insurance claim. consumer, often to the detriment of the consumer, ”she said. .

Carter is calling on the legislature to extend the consumer protections passed for benefit assignments to management agreements payable and related contracts in the next session that begins in January. Its proposal includes a requirement that insurers send payments directly to the policyholder rather than the contractor.

“Policyholders may not know that payments have been made, the amount of those payments and the assignee / contractor may take the money and never complete the job,” she wrote.

Jeff johnston, a lobbyist for Florida Restaurant Association, a trade association, said contractors who don’t get paid need the legal right to sue policyholders.

Some consumers – not the majority – will keep their insurance checks after receiving them and scoff when contractors threaten to file a lien, he said. “I can’t collect that lien unless they sell the house, and sometimes there are 18 liens above mine,” he said. “At the very least, insurers should be required to put contractors’ names on checks. “

Detailed cost estimates, he said, are not always achievable when homeowners are faced with severe flooding and leaks that need to be addressed immediately.

While some reforms may be necessary, it is ultimately up to insurance companies to assess contractors’ bills, he said.

“Instead, the insurance industry‘s first response is always, ‘Let’s pass more laws,’ he said.

It remains to be seen whether the Legislature will address the issue next year. Insurance industry officials say they feel reluctance among lawmakers to tackle new issues after passing major reforms in two of the past three years.

Ron Hurtibise covers business and consumer issues for South Florida Sunshine Sentinel. He can be reached by phone at 954-356-4071, on Twitter @ronhurtibise or by email at [email protected].

© 2021 South Florida Sun-Sentinel. Visit sun-sentinel.com. Distributed by Tribune Content Agency, LLC.

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