assignment of benefits in insurance claims: recent trends...

Assignment of Benefits in Insurance Claims:

Recent Trends, Court Decisions, and Practical

Guidance

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WEDNESDAY, OCTOBER 16, 2019

Presenting a live 90-minute webinar with interactive Q&A

Robert H. Friedman, Principal, Friedman, Palm Beach, Fla.

C. Scott Rybny, Chair Insurance Coverage & Extra-Contractual Litigation Group,

Morgan & Akins, Philadelphia

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Assignment of Benefits in Insurance Claims:Recent Trends, Court Decisions, and Practical Guidance

AGENDABy the end of this session, you will:

• Understand the significance of Assignments of Benefits;

• Know the current state of the law in the most hotly

contested jurisdictions;

• Receive information regarding state reform efforts and

trends;

• Understand the policyholder, contractor & insurer’s

perspectives;

• Be aware of “Best Practices”.

THE PRESENTERS

C. Scott Rybny, Esq. Robert Friedman, Esq.

Morgan & Akins Friedman P.A.

THE PRESENTERS

Robert Friedman, Esq.

• Friedman P.A. • Represents corporate policyholders in first-party and third-party insurance disputes

THE PRESENTERS

• Chair Insurance Coverage & Extra-Contractual Liability Group

• Specializes in First & Third-Party Property Insurance disputes

• Representing insurers for almost 20 years

C. Scott Rybny, Esq

• Morgan & Akins

OVERVIEW

ASSIGNMENTS OF BENEFITS

THE INSURANCE BERMUDA TRIANGLE

ASSIGNMENT OF BENEFITS -OVERVIEW

• Assignments arose out of contract law more than 100 years ago - the belief being that almost all contract rights are assignable.

• It is a document signed by a policyholder that allows a third party, such as a contractor to “stand in the shoes” of the insured.

• Most are limited to the ability to seek direct payment from the insurance.

• Some are not.

An assignment of rights does not give contractor the right to act as a public insurance adjuster.

CURRENT STATE OF THE LAW

THE LAW

• Majority view -assignments of benefits are permissible a matter of law

• Several states recently enacted legislation governing property insurance assignments

STATES WHERE COURTS PERMITPOST-LOSS ASSIGNMENTS

Washington D.C.

ELEMENTS FOR ASSIGNMENT (WHERE NO REGULATION)

• Assignor (homeowner) transfers to Assignee (contractor) certain rights or benefits under a contract.

• Assignee accepts rights or benefits for good consideration.

STATES THAT REGULATE ASSIGNMENTS

Washington D.C.

STATES THAT REGULATE ASSIGNMENTS

Washington D.C.

4/8/19

4/22/19

5/1/19

7/1/19

ELEMENTS FOR ASSIGNMENT (WHERE REGULATED)

• Varies from state to state

• Epicenter for Assignment of Benefit dispute;

• Current law 7 years in the making;

• Most comprehensive of states that have enacted similar legislation.

FL ST § 627.7152

• Named insured responsible for:– Policy deductible;

– Betterments ordered & performed;

– Contract work performed prior to assignment rescission.

• Assignment must also:– Be delivered to insurer in

such a way as to verify service within 3 business days;

– Contractor must contain a written, itemized, per-unit cost estimate of services to be performed;

– Must relate only to work performed to protect, repair, restore or replace dwelling.

Assignment must also include the following in 18-point uppercase and boldfaced type:

Highlights of § 627.7152

• Specifies circumstances under which litigation can be commenced

• Restricts fee shifting for lawsuits brought by contractors

This Photo by Unknown Author is licensed under CC BY-SA

Assignment must include:

• Itemized description of work;

• Itemized description of materials, labor & fees; and

• Itemized amount to be paid.

IA ST § 515.137A

Assignment must also:

• Contractor named as co-payee only;

• Confirm that contractor has not made any assurances regarding coverage; and

• Not impair mortgagee’s interest.

IA ST § 515.137A

Assignment must also include standardized language (capitalized & 14-point font)

Must be located in immediate proximity of

space reserved for insured’s signature

Failure to Comply with IA ST § 515.137A

• VOIDS the assignment; and

• Is considered an unlawful practice pursuant to Iowa’s Consumer Frauds Act

Assignment must include:

• Contractor named as co-payee only;

• Confirm that contractor has not made any assurances regarding coverage; and

• Not impair mortgagee’s interest.

NDCC, 26.1-39.2-04

Assignment must:

• Be provided to insurer w/in 5 days of execution;

• Not prevent or impair insurer’s ability to speak with insured; and

• Include a right to cancel.

NDCC, 26.1-39.2-04

Assignment must:

• List contractor as co-payee only;

• Not impair the rights or any mortgagees; and

• Not impair or inhibit insurer’s ability to speak with insured.

2019 Kansas Senate Bill 78

"AN ASSIGNMENT OF RIGHTS OR BENEFITS IS VOLUNTARY. YOU

ARE AGREEING TO ASSIGN CERTAIN RIGHTS THAT YOU HAVE

UNDER YOUR INSURANCE POLICY. WITH AN ASSIGNMENT, THE

RESIDENTIAL CONTRACTOR SHALL BE ENTITLED TO PURSUE ANY

RIGHTS OR REMEDIES THAT YOU, THE INSURED POLICY HOLDER,

HAVE UNDER YOUR INSURANCE POLICY. PLEASE READ AND

UNDERSTAND THIS DOCUMENT BEFORE SIGNING.

THE INSURER MAY ONLY PAY FOR THE COST TO REPAIR OR

REPLACE DAMAGED PROPERTY CAUSED BY A COVERED PERIL,

SUBJECT TO THE TERMS OF THE POLICY."

Failure to Comply with Kansas Senate Bill Version

• VOIDS the assignment; and

• Is considered an unlawful practice pursuant to the Kansas Consumer Frauds Act

• Insured has 5 business days to cancel contract if:– Claim is denied; or

– Proceeds insufficient to cover contract price.

• If contractor performs emergency services, agreed to by insured in writing, can collect amount due immediately.

AL ST § 8-36-2 Governs Roofing Contracts ONLY

Assignment must also include standardized language (bold & 10-point font)

“You may cancel this contract at any time before midnight on the fifth

business day after you have received written notification from your insurer

that all or any part of the claim or contract is not a covered loss under the

insurance policy or that the covered claim will not be sufficient to cover the

amount of the contract. This right to cancel is in addition to any other rights

of cancellation which may be found in state or federal law or regulation. See

attached notice of cancellation form for an explanation of this right.”

Assignment must also include standardized language (bold & 10-point font)

Furnish each insured a fully completed form in duplicate,

captioned “NOTICE OF CANCELLATION,” which shall be

attached to the contract but easily detachable, and which shall

contain in boldface type of a minimum size of 10 points the

following statement:

“If you are notified by your insurer that all or any part of the claim or contract is not a

covered loss under the insurance policy, or that the covered claim will not be sufficient to

cover the amount of the contract, you may cancel the contract by mailing, electronic mailing,

or delivering a signed and dated copy of this cancellation notice or any other written notice to

[name of contractor] at [address of contractor's place of business], at any time prior to

midnight on the fifth business day after you have received such notice from your insurer.

ELEMENTS FOR ASSIGNMENT

➢ For enforceability of specific mandatory language look to UM/UIM law in your jurisdiction.

➢ Assignment does not preclude insurer from speaking directly with insured.

➢ Where regulated, assignments can be voided or deemed void.

THE SIGNIFICANCE FROM

THE POLICYHOLDER, THE

CONTRACTOR &

INSURER’S PERSPECTIVES

THE POLICYHOLDER’S PERSPECTIVE

• Trusts contractor more than insurer

• Choice of contractor

• Low-ball insurer offers

• Getting repairs done right

• Matching

• Protecting against out-of-pocket expenses

• Avoiding the coverage battle

THE CONTRACTOR’S PERSPECTIVE

• Getting paid

• Doing the job right

• Avoiding the bean counters

• Unexpected work and change orders

• Fighting the insurer: pick your poison

THE INSURER’S PERSPECTIVE

CLAIMS IMPACT

FINANCIAL IMPACT

Average severities relatively stable between 2010 and 2015

PREMIUM IMPACT

INSURANCE FRAUD

• The cost of insurance fraud:

– Estimated to be more than $40 billion per year.

– Cost to the average family in premium increases = $400 to $700.

• https://www.fbi.gov/stats-services/publications/insurance-fraud

SPOTTING THE FRAUD

• Is the date of loss after the date the contract signed?

SPOTTING THE FRAUD

• Was the work completed & contractor paid before assignment?

SPOTTING THE FRAUD

• Work performed by subcontractors?

SPOTTING THE FRAUD

• Addendums?

SPOTTING THE FRAUD

• Re-inspections a must to confirm work completed

SPOTTING THE FRAUD

• Policy conditions & exclusions enforceable against a contractor?

WHERE DISPUTES ARISE

Critical Appraisal and Litigation Issues

Appraisal

• Policy mechanism used to resolve disagreements over “amount of the loss.”

• Billed by courts and advocates as cost effective means of resolving disagreements.

• Do not rule out but proceed with caution.

Appraisal Issues

• Can insured’s contractor satisfy “competent and disinterested” qualification?

• Appraisal not intended to resolve coverage disputes.

• Investigating appraisal qualifications for competency and bias?

Appraisal Issues

• Can insured’s contractor satisfy “competent and disinterested” qualification?

• Appraisal not intended to resolve coverage disputes.

• Investigating appraisal qualifications for competency and bias?

Litigation Issues

• More costly than appraisal.

• The insured as an indispensable party (which may raise venue issues)?

• Can resolve both coverage and damage disputes.

QUESTIONS

THANK YOU

Robert H. FriedmanFriedmanrob@friedmanpa.com

C. Scott RybnyMorgan & Akinssrybny@morganakins.com

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