Should you sign a Direction to Pay or Assignment of Benefits?

By now, most South Louisiana residents on Facebook have seen the tree removal invoice for a whopping $107,000 that recently went viral. This is definitely a cautionary tale, but there is an added element and warning that many people are missing.

The main takeaway is “NEVER LET ANYONE DO WORK ON YOUR HOME OR BUSINESS WITHOUT PROVIDING A QUOTE.”

People are desperate right now.

With the widespread destruction of Hurricane Ida, there seems to be more damage than there are qualified and honest professionals. It can be hard to find a tree service or a roofer that actually shows up. After 5 no-shows and water pouring into your home with every rain (seriously when will it stop raining!?!), it is so tempting to hire the person who does finally show up offering relief.

And, it is completely understandable that many times the cost is variable. I’m an attorney, I definitely understand “it depends.”

However, every person working on your house should provide a written quote.

If that quote can change depending on what they find when they get in there and start doing the work, that should be noted and you should be notified before they begin the more expensive work of what they found and how that will affect the price. A new price should be agreed upon at that point.

This is the superficial lesson to the $107,000 tree removal.

But, think about this further.

What if that tree company was a contractor or a water mitigation company?

What if they were “helping you out” by “taking away all of your stress” and dealing with the insurance company directly?

What if you agreed to sign a "direction to pay" or "assignment of benefits" to let them handle your insurance claim for you?

A direction to pay gives contractors the right to bill insurance companies directly for their repair services. (This is prohibited in some states, but allowed in Louisiana.)

What if they know exactly what to do to charge the insurance company $30,000 for a job that should cost $5,000?

They brag to you that they got you 6 times more than the insurance company would have paid.

You’re thinking: "WOW! That’s incredible. These are great people that are truly looking out for my best interests. I’ve been so blessed to find them."  

However, they did not get YOU anything extra. They got paid that much extra. YOU didn’t get anything additional out of the deal other than maybe a little satisfaction of sticking it to the insurance company.

I am all for companies running successful, profitable businesses. I think everyone should be paid fairly for their expertise, time, and hard work. 

Assigning your entire insurance claim to a third party takes you out of the process and gives control of your claim to the contractor. I completely understand how this is tempting. Who wants the hassle of dealing with the insurance company?

But, what if they continue to overcharge and max out your policy limits?

What if there are still things to rebuild, repair, and replace and now you’re out of insurance funds?

I have unfortunately seen this time and time again.

Clients come in wanting to sue the insurance company because they are not paying them for the remaining repairs, but upon closer inspection, the true problem is the contractor who already milked their policy for all it was worth. (And that's not even getting into the scheme one out-of-state law firm used to take advantage of people signing their claims over to their roofing company.)

Now, having a contractor deal directly with the insurance company doesn’t necessarily mean that they are dishonest. This is a common direct insurance billing arrangement, but one that I personally choose to avoid.

However, contractors should still be providing you with quotes before doing work. If they will not provide you with a quote because they bill the insurance company directly, this is a red flag.