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OIC seeks ban on post-loss assignment clauses that transfer policy rights to contractors
Summary
The Office of the Insurance Commissioner proposed prohibiting post-loss assignment-of-benefits clauses in repair contracts that assign policy rights to contractors, arguing such clauses strip consumer protections and shift claim control away from policyholders.
David Fort, senior policy advisor for property and casualty, outlined proposed language to prohibit post-loss assignment-of-benefits clauses in repair contracts for property losses. The OIC says such clauses, when signed after a loss, transfer an insured's policy rights and benefits to the contractor, allowing the contractor to control claim communications, accept payments, and pursue litigation without recourse for the original insured.
Under the proposed approach, the state would bar contract language that assigns over an insured's insurance benefits in a way that removes statutory consumer protections. The proposal would preserve homeowners' ability to retain professionals — public adjusters and attorneys — to assist with claims and would account for real-estate transactional circumstances where damage can occur before ownership transfers.
Fort said the change is intended to protect homeowners who may be vulnerable after catastrophic damage and to ensure statutory consumer protections remain tied to the policyholder. OIC staff said they will share draft statutory language and welcome stakeholder feedback.
Next steps: OIC will publish model language and continue to solicit stakeholder input ahead of the legislative session.
