The process of rebuilding following a major natural disaster involves many tricky and nuanced legal issues. We are all aware of the important role that property insurance plays in helping us rebuild. Just as important are the contractors that get the work done.
Hurricane Ida has brought a large influx of out-of-state contractors into Louisiana. The plain truth is there is a significant demand for contractors, roofers, and construction workers to rebuild, and it will take quite sometime to complete the rebuilding process.
It is common for some contractors to offer to do the work under what is called an assignment of benefit. An assignment of benefit or AOB is a contract in which you transfer your insurance claim rights to the contractor. Under an assignment of benefit agreement, the contractor will have the right to payment on your insurance claim. In exchange, the contractor agrees to make repairs to your property.
If you are considering an assignment of benefits you should first have a good understanding of the repairs that need to be made to your property. It is also important to understand the scope of work the contractor is agreeing to perform. If the contractor is unwilling to repair the property to its pre-loss condition, it is a potential red flag. Your insurance company is obligated to pay to make adequate repairs to your property. Your contractor should be willing to do the same.
Assignment of benefits are not inherently good or bad. Many contractors perfrom a valid service to their customers under an assignment of benefits, and, in doing so, help others return to their homes and businesses quicker. There have been some major problems with contractors being financially unable to do the work while operating under an assignment of benefits. Some contractors simply do not have the financial ability to do the work promised while waiting for insurance companies to pay claims.
It is important for you as the property owner to do your own due diligence before hiring a contractor or signing an assignment of benefits. Get multiple bids and do your research on the contractor before agreeing to let them do the work because it is difficult to switch course once a contract is signed.
Are AOBs Enforceable in Louisiana?
As for the enforceability of assignment of benefit agreements, Louisiana does permit insurance companies to prohibit a post-loss assignment of benefits. The Louisiana Supreme Court has ruled that an insurance company seeking to restriction on assignment of benefits needs to have clear language in the policy restricting the assignment. A general restriction on all assignments of benefits is not enforceable. The policy must specifically state that a policyholder cannot assign a post-loss benefit following a loss. A post-loss assignment simply means an assignment to the rights for a specific claim. Without this exact language, the insurance company cannot prevent a post-loss assignment of benefit.
The attorneys at MyInsuranceCase have assisted both property owners and contractors with assignment of benefit issues. If you have a question about an assignment of benefit, please do not hesitate to contact us.
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