Be Careful When Signing Assignments of Benefits
An assignment of contractual rights arises when one party hands over or transfers contractual rights to receive or to do something to another party. For example, if someone owes me $100 and I assign my rights in the contract to you, the paying party will have to pay you my $100.
Assignments in Homeowner’s Insurance Cases
Assignments of benefits play a big role in homeowner’s insurance contracts. Assignments help people retain contractors and repair people faster than they normally would by assigning them insurance proceeds that would normally be paid to the homeowner.
For example, let’s say that a water pipe explodes in your house. You find a contractor who is ready able and willing to fix it and you have insurance that will cover it. The problem is that even in the best of circumstances, the insurance money isn’t in your hand. It could take time to get it but because your house is flooded, you can’t exactly wait 2 months for the check before starting repairs. You surely don’t have the money to pay the repair company out of your own pocket and wait for the insurance money.
An assignment of benefits allows a homeowner to assign the rights to an insurance policy to the company repairing damage to the house. In return for that assignment, the contractor will begin work without charging the homeowner directly, confident that when the insurance money comes in, it will go to him/her. The assignment in essence is your payment, or promise of payment, to the contractor.
Assignments also give the contractor the right to directly communicate with the insurance company, negotiate payments, and make repair decisions without consulting with the homeowner, meaning the homeowner may not have a say in the process.
Mortgage Company Problems
Many insurance companies include clauses in the homeowners’ policy requiring that a mortgage company or bank that issued the mortgage must consent to the assignment. Many insurance companies were fearful of being sued by mortgage lenders if they paid a contractor directly without getting permission from a mortgage lender.
The Florida Office of Insurance Regulations now prohibits insurance companies from including this language in homeowners’ policies.
Be Wary Before Signing Assignments
There are some things to remember about assignments of benefits. You are likely assigning away the right to sue your insurance company if there’s a problem related to the claim; the contractor holds that right without the homeowners’ input.
Many assignments only allow the insurance company to communicate with the repair people, not the homeowners. Thus, you may be out of the loop as far as information goes.
And most assignments are irrevocable, so choose your repair people wisely. You are often losing the right to fire one company and hire another to do the work, as well as the right to refuse payment for substandard repair work if you’re unhappy with a company’s repairs or remediation.
Let Us Help You Today
Has your home sustained serious damage? Contact the Celeste Law Firm in West Palm Beach today for a consultation about helping you deal with the insurance company.