Introduction
Assignment of Benefits (AOB) is a concept in property and casualty insurance whereby a policyholder transfers all their rights under an insurance contract to another party, such as a repair contractor. This arrangement enables the third party to receive payments directly from the insurer for services rendered, often in connection with property repairs following a covered loss and, in many cases, prevents the insurer from discussing the claim and repair costs with the insured.
Current Legal Framework
Under current law, public adjusters are not permitted to request an assignment of insurance policy proceeds from an insured with whom they have entered into a contract to provide adjusting services. Additionally, insurers are not obligated to honor an assignment of insurance policy proceeds to a public adjuster. Contractors have been avoiding this law by including Assignment of Benefits provisions in their repair contracts. This bill imposes reasonable consumer and contractual protections by allowing for limited assignment of benefit provisions.
Proposed Legislation
Residential contractors are prohibited from advertising or promising to rebate any portion of an insurance deductible as an inducement for the sale of goods or services. Residential contractors are also forbidden from representing or negotiating on behalf of the owner or possessor of residential real estate for any insurance claim. Any assignment of rights or benefits under a property insurance policy to a residential contractor must meet certain criteria. These criteria include an itemized description of the work to be performed, details of materials and labor, a breakdown of fees, and the total amount to be paid. The named insured retains the right to cancel the assignment for any reason within five business days, and this right must be clearly disclosed in writing within the assignment document. If a residential contractor violates any provision of the bill, the contract is rendered void. The Commissioner of Insurance may impose a forfeiture of up to $10,000 per violation after providing notice and a hearing. The commissioner, attorney general, or district attorney may investigate suspected violations and seek court orders to halt such activities.
This proposal protects consumers by:
- Preventing Insurance Fraud and Abuse
- Streamlining the Claims Process
- Protecting Policyholders