Repair contractors’ newest billing strategy
leaves homeowners on the hook if insurers don’t pay
Article Courtesy of The Sun Sentinel
By Ron Hurtibise
November 25, 2021
Imagine receiving an unexpected $7,500 invoice
telling you that your payment is more than 30 days past due and that
you’re responsible for it if your homeowner’s insurance doesn’t cover
That’s the scare that Carla Axelrod
experienced after her water heater sprang a leak in
September. Insurance experts in Florida are warning that
it’s the result of the latest billing strategy by repair
contractors that leaves homeowners vulnerable to
surprisingly high invoices, liens against their homes and
lawsuits if insurers fail to pay.
The strategy involves requiring homeowners to sign what’s
called a “Direction to Pay,” and it gives contractors the
right to bill insurance companies directly for their repair
services. It sounds convenient, but what customers might not
know is that by signing the document, they agree to pay
whatever portion of the contractor’s invoice 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 salvo in an ongoing battle between
contractors and home insurance companies in Florida.
Prior to 2019, many contractors specializing in water
dry-out services and roofing required homeowners to sign
what’s called an Assignment of Benefits, which enabled
contractors to assume the policyholder’s right to sue an
insurer over claims. Insurers say this promoted abuse.
Lawsuits against insurers exploded, and
so did insurance costs for all Florida homeowners.
As a result, the state enacted restrictions and consumer
protections in 2019 that were intended to curb abuses and
Carla Axelrod overlooks walls in her Boca Raton home
where workers with Roto-Rooter's water dry-out service ripped out
tile baseboards in September. Axelrod says she called the company to
get an estimate for a replacement of her leaking water heater.
Instead, a company representative convinced her to authorize
services that ultimately totaled much more, she said.
Insurers now contend that contractors are using a document called a
Direction to Pay, 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 those Assignment
of Benefits restrictions to all contracts authorizing repairs of damage
covered by property insurance.
Axelrod, a Boca Raton retiree, learned the hard way that she was
ultimately responsible for paying a $7,476 invoice to a company that
obtained her signature to perform extensive dry-out services after her
aging water heater sprang a leak in September.
Axelrod said she called Roto-Rooter because she wanted a cost estimate
for a new water heater.
But a Roto-Rooter field supervisor who came to her house showed her
moisture test readings that he said proved that the leak had seeped into
her walls and could lead to mold infestation, a serious health risk, she
“The first thing the field supervisor asked was, ‘Do you have homeowner
insurance?’ I said, ‘yes,’ and he said, ‘They’ll pay for everything
except the water heater and 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 tore out tile
baseboards from the bottoms of walls in areas surrounding the water
heater. They installed plastic sheeting and seven machines to remove
moisture from the air and her walls. They did not replace the water
Six weeks later, Axelrod received an invoice from Roto-Rooter for $7,476
along with an ominously worded letter saying her invoice was more than
30 days past due and that she would have to pay it if her insurer did
not pay within 30 days.
Axelrod said she was shocked at the bill amount and requested an
itemized invoice. Services listed on the invoice left her shaking her
head: Most of the charges were related to set-up and use of the dry-out
machines. But there were also $193.44 for “content manipulation,” $18.02
for cleaning her kitchen sink, and $182.63 for hauling away the
half-dozen or so sections of torn-out baseboard.
She was surprised to see charges totaling $304 for removal, resetting
and cleaning her refrigerator and dishwasher, which she does not
Roto-Rooter spokesmen interviewed for this story said the appliances
must have been removed, reset and cleaned when Axelrod was not present
in the kitchen. “We do not bill for services we do not provide,” said
Jason Trace, general manager of the company’s Fort Lauderdale office.
Axelrod won’t have to pay Roto-Rooter’s invoice. After the South Florida
Sun Sentinel contacted Roto-Rooter and her insurer, Universal Property &
Casualty, about her situation, a Universal representative called Axelrod
and assured her that the invoice would be covered.
And she’ll be able to use a $6,200 check that Universal gave her in
September to cover repairs to her home, including replacing the
baseboards that Roto-Rooter tore out. Axelrod said she was afraid she’d
be forced to give that check to Roto-Rooter, leaving her unable to
afford the fixes.
‘Assignment’ reforms increase policyholder risk
Until the Assignment of Benefits reforms were enacted in 2019, Axelrod
might have never seen the itemized invoice that Roto-Rooter submitted to
her insurer, just as policyholders were often not notified when
contractors filed lawsuits in their names.
In state legislative hearings over the reforms enacted in 2019,
contractors and insurers blamed one another for increases in litigation
and costs. Contractors complained that insurers over-scrutinized their
invoices and typically offered to pay just a fraction of what was owed.
Insurers said many contractors and attorneys routinely submitted
fraudulent claims to obtain as much money as possible.
And while the reforms have succeeded in reducing assignments,
contractors have turned to the Direction to Pay as a way to avoid the
2019 restrictions while retaining the ability to invoice insurers
directly, insurers say.
Consumers left with fewer protections
As a result, consumers who sign Direction to Pay contracts lose the
protections built into the 2019 reforms, including immunity from being
sued by contractors and the right to receive a detailed estimate.
Axelrod said she would not have authorized Roto-Rooter to provide such
extensive dry-out services if she had known beforehand what the company
planned to do.
Under Direction to Pay contracts, customers only have three days to
cancel work agreements. The Assignment of Benefits reforms allow 14 days
Axelrod’s contract with Roto-Rooter includes a clause waiving any right
In addition, the Assignment of Benefits reforms forbid contractors from
trying to collect from customers any money not paid by insurers,
including by filing liens against their homes or suing them in court. No
such restrictions exist under a Direction to Pay agreement.
Other loopholes not addressed in the 2019 reforms put policyholders at
risk, insurers say.
Locke Burt, president and CEO of the Ormond Beach-based firm Security
First Insurance, says consumers who sign Direction to Pay contracts are
in effect “signing a blank check” to contractors, he said.
Contractors “can assign work to someone else without permission. They
can keep the (payment) difference if they assign the work to someone
else,” Burt said.
The biggest problem, according to Paul Handerhan, president of the
consumer-focused Federal Association for Insurance Reform, is
“nondisclosure of the scope of work” and what it will cost.
In an email, Tasha Carter, the state’s Insurance Consumer Advocate, said
she has spoken with numerous consumers who were left unprotected after
signing Direction to Pay agreements. Some allow contractors to assess
fees to consumers who terminate their contracts, she said.
Although the contracts state that the consumers are not signing over
benefits of their insurance policies, they function in much the same
way, by allowing “a contractor to exercise control over a consumer’s
insurance claim, often to the detriment of the consumer,” she said.
Carter is calling for the Legislature to extend consumer protections
enacted for Assignments of Benefits to Direction to Pay agreements and
related contracts during the upcoming session that begins in January.
Her proposal includes a requirement that insurers send payments directly
to the policyholder rather than the contractor.
“Policyholders may not be aware that payments have been issued, the
amount of those payments and the assignee/contractor can take the money
and never complete the work,” she wrote.
Jeff Johnston, a lobbyist for Restoration Association of Florida, a
trade association, said contractors who don’t get paid need the legal
right to pursue policyholders.
Some consumers — not a majority — will keep their insurance checks after
they receive them and laugh when contractors threaten to file a lien, he
said. “I can’t collect on that lien unless they sell the house, and
sometimes there’s 18 liens above mine,” he said. “At the very least,
insurers should be required to put contractors’ names on the checks.”
Detailed cost estimates, he said, aren’t always feasible when homeowners
are facing serious flooding and leaks that must be addressed
While some reforms might be necessary, ultimately it’s insurance
companies’ responsibilities to evaluate contractors’ invoices, he said.
“Instead, the insurance industry’s first answer is always, ‘Let’s enact
more laws,’'’ he said.
It remains to be seen whether the Legislature will address the issue
next year. Insurance industry officials say they sense a reluctance
among lawmakers to take on new issues after enacting major reforms two
of the past three years.