pennsylvania assignment of benefits law

You are using an outdated browser. Please upgrade your browser to improve your experience.

Assignment of Benefits, Part 3: Pennsylvania

At the request from a reader, Part Three of my blog series on Assignments of Benefits (“AOBs”) will look at Pennsylvania and whether AOBs are valid and enforceable there.

“Under Pennsylvania law, an assignment is ‘a transfer or setting over of property, or of some right or interest therein, from one person to another, and unless in some way qualified, it is properly the transfer of one whole interest in an estate, chattel, or other thing.’” 1 As I state in each of these posts, a Standard HO3 Policy, includes the following language under the Conditions Clause: “Assignment of this policy will not be valid unless we give our consent.” The “we” meaning the insurance carrier, and where an insurance carrier challenges AOBs, they utilize this clause as the basis for their position that the AOB is invalid.

With regard to the non-assignment clauses, courts in Pennsylvania have held them valid but note, “the Pennsylvania courts scrutinize them carefully by examining both the specific language used and the purposes for which they have been inserted.” 2 Concerning AOBs:

In the context of insurance polices, anti-assignment clauses are enforceable under Pennsylvania law to invalidate any assignment of rights under a policy that predates a loss covered by the policy… A “loss” is “the occurrence of the event, which creates the liability of the insurer. 3

The Pennsylvania courts have explained their reasoning as follows:

Generally, non-assignment clauses are included in insurance policies for the protection of insurers. Such clauses are designed to guarantee that an increase of the risk of loss by a change of the policy’s ownership cannot occur without the consent of the insurer. Because non-assignment clauses limit the amount of risk that the insurer may be forced to accept, courts will generally strike down an insured’s attempt to assign its policy to a new insured. Consistent with the general purposes of non-assignment clauses, however, courts are reluctant to restrict the assignment of an insured’s right to payment which has already accrued. Therefore, because an insured’s right to proceeds vests at the time of the loss giving rise to the insurer’s liability, restrictions on an insured’s right to assign its proceeds are generally rendered void. 4

As we’ve seen with New Jersey and Maryland, AOBs are valid and enforceable in Pennsylvania provided they are assigned after a covered loss.

If you have any specific questions on AOBs or would like to see your state come up sooner, please comment below, or send me an email .

As always, I’ll leave you with a (mildly) related tune, here’s Pennsylvania’s own Poison with their hit, Nothin’ But A Good Time :

1   Seneca Ins. Co., Inc. v. Lexington and Concord Search and Abstract, LLC, 484 F.Supp.2d 374, 377 (E.D.Pa. 2007) citing Fran & John’s Doylestown Auto Center, Inc. v. Allstate Ins. Co., 432 Pa.Super. 449 (1994) . 2 Id. 3 Id. at 377-78. (Internal citations omitted.) (Emphasis added.) 4 Id. at 378.

Related Posts

Pennsylvania Bad Faith Law and Learning From Others Cases

A Refresher on Overhead and Profit in Pennsylvania: Mee v. Safeco

Pennsylvania Bad Faith Archives: Shawnee Tabernacle Church v. GuideOne Insurance

We’re ready to serve you.

Our firm represents residential, commercial and government entities in seeking timely, fair and proper compensation. We also support adjusters and contractors and work to protect their fees. In addition, we proudly serve as a reputable firm for referring attorneys to entrust their clients with should they be approached with an insurance claim case. Don’t fight insurance companies on your own. Contact us today!

Expert Insights Delivered to You

Insurance Consumer Rights in Pennsylvania (2022)

Insurance policies are contracts and legal rules come into play when you file an insurance claim.  You are “the insured” and your insurance company is “the insurer.”  Understanding how your insurer should handle your claim and what your rights are will help you navigate the process, be your own best advocate and collect all available policy benefits to cover your losses.

After disasters, it’s common for an insurer to rotate adjusters, which means you will have to work with multiple adjusters before your claim is resolved.  Knowing your legal rights will make it easier for you deal with rotating adjusters and keep your claim on track toward a fair and full claim settlement without unreasonable delays.

Your insurance company and its employees are required to be fair and reasonable and follow state laws and regulations. They must do a timely, thorough and unbiased investigation and assessment of your loss(es) and claim. They must work with you to adjust your claim and pay what they owe in a timely and fair manner and in full compliance with the policy contract and applicable laws.

Insurance company claim adjusters are supposed to be trained on your state’s laws and claim handling regulations, but it’s often up to you to make sure they’re valuing your losses fairly, offering all benefits you’re entitled to, and following the regulations and laws in your state.

Use the guidance and sample letters you’ll find on our website to  “speak UP” and collect all benefits you’re entitled to under the policy you paid for.

The information included here will give you a basic understanding of how the claim process should go and the legal rights that give you leverage to get a fair outcome. Here are the places where your rights as an insurance consumer are spelled out:

–Pennsylvania Statutes  Title 40 Insurance

– Pennsylvania Code Title 31 Insurance                                                                       Unfair Insurance Practices Chapter 146

– Notices and bulletins issued by the  Pennsylvania Insurance Department .

Claim Communications

UP strongly recommends keeping a daily claim journal.  As often as possible, jot down the date, time, and details of conversations, issues, problems and agreements with the adjuster assigned to your claim and other professionals such as contractors, government agencies, etc.

Also, we strongly recommend communicating in writing with insurance company representatives so there is a clear paper trail of how your claim is being handled. These days many communications will be via email, so make sure to save those emails where you can find them. After in-person or phone conversations with insurance company representative you should send short follow-up emails or letters summarizing what was said or agreed to. Document that you’re cooperating fully with the insurer.  This will prevent them from blaming you for delays and confirm that you’re holding up your end of the bargain.

Check out our “Speak UP” tips on being politely assertive, organized and avoiding delays and misunderstandings.

Time Frames and Deadlines

Below are timeframes and deadlines to be aware of.  After a disaster, deadlines can become unrealistic due to shortages of available inspection, clean up and construction professionals.  Speak UP! Document the contractors or service providers you called, who you spoke with, and what they told you in your claim journal.  Sometimes following a natural disaster more work exists than skilled labor can support, and it is important to document that you kept trying to find someone to help protect your property following a loss.

Processing your claim

10 Working Days –  Under Pennsylvania law, insurers must acknowledge the receipt of a notification of claim within 10 working days after receiving it, unless payment is made within that period of time. 31 Pa. Code § 146.5(a).

10 working days – your   insurer must provide you with all necessary claim forms, instructions and reasonable assistance within 10 working days so that you can comply with the conditions of their policy. Compliance with this requirement within 10 working days of a notification of claim shall constitute compliance with subsection (a) above. 31 Pa. Code § 146.5(d).

Communicating information to you

10 Working Days –  Your insurer must reply to all pertinent communications from you that reasonably suggest a response is expected within 10 working days after receipt. 31 Pa. Code § 146.5(c)

Investigating your claim

30 Days –  Every insurer shall complete investigation of a claim within 30 days after notification of claim unless the investigation cannot reasonably be completed within the time. Every 45 days thereafter, the insurer shall provide the claimant with a reasonable written explanation for the delay and state when a decision on the claim may be expected. 31 Pa. Code § 146.6.

Paying or denying your claim

15 Working Day –  Within 15 working days after receipt by the insurer of properly executed proofs of loss. Your insurer should notify you of the acceptance or denial of your claim. An insurer may not deny a claim on the grounds of a specific policy provision, condition or exclusion unless reference to the provision, condition or exclusion is included in the denial. The denial shall be given to the claimant in writing and the claim file of the insurer shall contain a copy of the denial. 31 Pa. Code 146.7 (a)(1)

More time  – If the insurer needs more time to determine whether a first-party claim should be accepted or denied, it shall so notify the first-party claimant within 15 working days after receipt of the proofs of loss giving the reasons more time is needed. If the investigation remains incomplete, the insurer shall, 30 days from the date of the initial notification and every 45 days thereafter, send to the claimant a letter setting forth the reasons additional time is needed for investigation and state when a decision on the claim may be expected. 31 Pa. Code 146.7 (c)(1).

Preserving your right to sue if necessary

There is typically a deadline in your insurance policy for filing a lawsuit related to a claim. Check your policy for a “suit against us” provision, or similarly worded provision, to find that deadline.  It’s typically 12 months from the date of loss or the date your insurer closes your claim.  However, the laws in your state that apply to lawsuit deadlines may extend the period stated in your policy, so it’s best to check with an experienced Pennsylvania state attorney to avoid losing your legal rights and the leverage those rights give you to get a fair payout on a claim.

Unfair Claim Practices

Your insurer is prohibited from using unfair claim practices and/or treating you badly during the claim process. These practices are set out in the Pennsylvania Statutes and in the Pennsylvania Code.  Pennsylvania has adopted the Unfair Claims Settlement Act. The following are a few examples listed in the Pennsylvania Statutes   40 P.S. §§ 1171.5(a)(1) Specific  Unfair claim settlement practices defined :

(a) “Unfair methods of competition”  and  “unfair or deceptive acts or practices”  in the business of insurance means:

(1) Making, publishing, issuing or circulating any estimate, illustration, circular, statement, sales presentation, omission comparison which:

(i) Misrepresents the benefits, advantages, conditions or terms of any insurance policy;

(ii) Misrepresents the premium overcharge commonly called dividends or share of the surplus to be received on any insurance policy;

(iii) Makes any false or misleading statements as to the dividends or share of surplus previously paid on any insurance policy;

(iv) Is misleading or is a misrepresentation as to the financial condition of any person, or as to the legal reserve system upon which any insurer operates;

(v) Uses any name or title of any insurance policy or class of insurance policies misrepresenting the true nature thereof;

(vi) Is a misrepresentation for the purpose of inducing or tending to induce the lapse, forfeiture, exchange, conversion or surrender of any insurance policy;

(vii) Is a misrepresentation for the purpose of effecting a pledge or assignment of or effecting a loan against any insurance policy; or

(viii) Misrepresents any insurance policy as being shares of stock.

Remedies: Filing an official complaint with your State Insurance Agency

The Pennsylvania Insurance Department oversees how insurance companies operate in the state. They can impose penalties on your insurance company if they it did not comply with the laws in your state that require insurers to handle claims fairly and in good faith.

Visit Insurance Resources for Pennsylvania  for resources and tips on the process and strategy of filing a formal complaint.

You can call the Office of the Insurance Commissioner consumer hotline with any questions or complaints toll-free at 1-877-881-6388, email insurance questions to  [email protected] . File a complaint online, by going to https://www.insurance.pa.gov/Consumers/insurance-complaint/Pages/default.aspx Select “File a Complaint” for an online form.

Or download a pdf and complete it by mail:

https://www.insurance.pa.gov/Consumers/insurance-complaint/Documents/Complaint%20Form.pdf .

Their mailing address is:

Pennsylvania Insurance Department

Bureau of Consumer Services

1209 Strawberry Square

Harrisburg, PA 17120

Special rules that may be in place after a disaster

Check the Pennsylvania Insurance Department website regularly to find all rules, regulations or other updates they may have put out that are specific to the disaster. https://www.insurance.pa.gov/Regulations/Laws%20Regulations/Pages/DeptNotices.aspx

After past disasters, special rules have been put into place such as:

• Requirements that insurers advance funds for temporary expenses instead of requiring you to incur and submit receipts.
• Requirements that insurers extend deadlines for submitting proofs of loss and other documents.
• Agreements with insurers that they will accept less detailed contents inventories.

Hiring Professional Help

When you paid your premium, you paid for coverage  and  good claim service. In theory, you should not have to hire outside help to get what you already paid for. However, in reality, you may need to.  You have the right to hire an attorney or public adjuster to help navigate your claim. However, we urge caution before agreeing to pay a portion of your insurance benefits to any professional, and before hiring anyone to speak for you or negotiate on your behalf with your insurance company. Only hire someone who has strong references and who is likely to add value to your claim and recover more funds more quickly than you’d be able to recover on your own.

Attorneys  – If you hire an attorney to resolve an insurance claim dispute, try to hire them on a contingency (not hourly) fee basis and agree to advance litigation costs. Claim disputes are time-consuming, so it gets expensive fast when you pay by the hour.  Ideally, arrange for one or two qualified attorneys to do an initial evaluation of your situation free of charge.  Only hire one that has represented insurance consumers in claim disputes and is a member in good standing of the Pennsylvania Bar. Visit our Pennsylvania Professional Help Directory.   We strongly recommend reading our publication titled “Questions and Answers for Hiring an Attorney for an Insurance Claim” before making this important decision.

Public Adjusters – A qualified public adjuster can value your losses, handle the day-to-day aspects of your claim and negotiate a settlement on your behalf. Generally speaking, if you hire a public adjuster, you agree to pay them a percentage of the insurance benefits they recover on your behalf – not an hourly fee. Pennsylvania public adjusters can also be found by visiting our Pennsylvania Professional Help Directory.   We strongly recommend reading our publication titled  “Questions to Ask Before Hiring a Public Adjuster” before making this important decision.

Using the Legal System to get a Fair Settlement

If you haven’t been able to get a fair insurance claim settlement on your own or with help from a professional and/or your state’s insurance oversight agency, filing a lawsuit is your next option. If your lawsuit is successful, you can recover what the insurer owed and (ideally) also get compensation for the expenses you incurred chasing the policy benefits you were entitled to in the first place. Your success in using the legal system to get a fair settlement will depend on the quality of the lawyer(s) you hire, the laws in your state and the facts in your case.

It’s common to worry that a lawsuit will be too time consuming or expensive (or both), but if you get the right lawyer and your case is strong, suing an insurer is often the best and only way to recover what you’re owed. Finding a qualified lawyer is essential. Insurance matters require specialized expertise, and you need a strong advocate who speaks the language and has previous experience litigating against an insurance company.

Start in our  “Find Help”  section and click on your state to find professionals who specialize in representing policyholders and support United Policyholders. You’ll find many lawyers on the Internet that advertise as insurance specialists, and many of their websites have a chat window that pops up as soon as you visit their site. Speak directly to the lawyer who’d be handling your case and interview them about their insurance and litigation experience. Get and check client references. A lawsuit is a major undertaking but is often the best way to get full compensation, so be an astute consumer and choose your attorney carefully.

The cost of hiring an attorney varies from firm to firm.  The two main options are attorneys who charge by the hour and those who work on contingency. For most policyholders, hiring an attorney on a “contingency” fee basis is the only feasible way of doing battle with a well-funded insurance company. Hourly fees for lawyers vary according to firm size, experience of the attorney, and geographic location. While attorneys who work on contingency usually set their fee at 33% of the amount they recover on your behalf, that may increase to 40% if your case goes to trial.  Most cases settle before trial. In some states you may not have the option of hiring an attorney on a contingency fee basis.

Using the legal system gives you leverage to get a better settlement and a lawsuit is a valuable tool. For more guidance on what to consider before suing your insurance company, read  Hiring an Attorney for an Insurance Claim .

Best Practices

Visit and use UP’s Disaster Recovery Help Library to get information, about the recovery process, after a disaster occurs.  Additionally, for best practices, follow these steps:

Inventory and document your losses . Take pictures of identifiable items before they’re removed for disposal or repairs before your lot gets cleared.  Create detailed lists of damaged property. If your home was seriously damaged or completely destroyed, get at least one, ideally two, independent repair/replacement cost estimates.

Cooperate with your insurer as best you can and keep a good paper trail.   If you are not able to stay in your home, make sure the company has an address and phone number where it can reach you.

Be present for inspections.  It’s a good idea to be home when the adjuster and or others inspect your property. Feel free to ask your contractor to be there with you to explain his/her opinions and estimates to the insurance company’s representatives.

Make only urgent/temporary repairs before filing a claim.  Your insurance company may deny your claim if you make permanent repairs before it inspects. If you’re not sure if your company considers a repair to be permanent, ask your company (in writing) before starting any repair work. The cost of these repairs and for storing personal belongings is likely covered by your policy.

Keep receipts.  Your insurer will usually require you to provide receipts before they’ll reimburse you for expenses due to losing the use of all or part of your property. This is also true for collecting full replacement costs above depreciated/actual cash values. On our website you’ll find a free expense spreadsheet to help you keep track.

Speak UP .  Be politely assertive, communicate clearly, and set realistic goals during the claim process.

The information presented in this publication is for general informational purposes and is not a substitute for legal advice. If you have a specific legal issue or problem, United Policyholders recommends that you consult with an attorney. Guidance on hiring professional help can be found in the “Find Help” section of www.uphelp.org . United Policyholders does not sell insurance or certify, endorse or warrant any of the insurance products, vendors, or professionals identified on our website.

Source: https://uphelp.org/claim-guidance-publications/insurance-consumer-rights-in-pennsylvania-2022/ Date: May 15, 2024

• Our Approach
• Special Services
• Analytics & Outcomes
• Client Education
• News & Events
• Practice Articles

A Royal Assignment [of Benefits]: Ramifications for Insurers in the First-Party Property Context

With recent decisions in the U.S. District Court for the Eastern District of Pennsylvania, insurers must be braced for bad faith claims brought by their insured’s vendors. For the past 25 years, with the enactment of 42 Pa. C.S. § 8371, Pennsylvania’s bad faith statute has allowed insureds to bring lawsuits against their insurance companies for improper first-party claims handling, with the primary purpose being to hold insurers accountable for good faith and fair dealing towards their insureds. See, generally , 42 Pa. C.S. § 8371; see also Charter Oak Insurance Co. v. Maglio Fresh Food , 45 F.Supp.3d 461 (E.D. Pa. 2014).

Prior to the enactment of 42 Pa. C.S. § 8371, bad faith actions existed only under common law, and only in the third-party context, wherein an insured could sue their liability carrier for a bad faith refusal to settle a lawsuit against the insured within the policy limits, exposing him to an excess verdict. In the third-party/excess verdict context, courts have held assignments of bad faith claims, post-judgment, to be valid. See, e.g. , Gray v. Nationwide Mutual Insurance Co. , 223 A.2d 8 (Pa. 1966); Allstate Property & Casualty Insurance Co. v. Wolfe , 105 A.3d 1181, 1188 (Pa. 2014) (carving out scenarios in which bad faith claims may be assigned by insureds).

A concept rooted in contract law, an assignment is the signing over of a claim by one party to the contract to a non-party. This has been found acceptable in the first-party insurance context when an insured assigns benefits for services rendered, such as to a physician in a PIP claim or to a mitigation vendor in a property claim, but courts stopped short of extending this concept to the assignment of extra-contractual tort claims such as bad faith.

Some states, such as Florida, have allowed vendors to secure post-loss assignments, not only for services rendered, but for extra-contractual damages such as attorney’s fees and bad faith in the first-party context, leading to what may be described as an insurance crisis. It has been widely reasoned that lawsuits involving the assignment of benefits have increased between 2004–2018. See Bethan Moorcraft, AOB Abuse in Florida Rises 70% in 15 Years , Insurance Business Mag. , Mar. 28, 2019, https://www.insurancebusinessmag.com/us/news/breaking-news/aob-abuse-in-florida-rises-70-in-15-years-163448.asp . Mostly due to the assignment of benefits, Florida is responsible for 76% of lawsuits filed against insurance companies in the United States, although the state itself only accounts for 8% of the population. David Altmaier, Florida OIR Report , Insurance Journal , Apr. 2, 2021, https://www.insurancejournal.com/app/ uploads/2021/04/Florida-OIR-Report.pdf .

In Pennsylvania, however, courts had not allowed the assignment of a bad faith claim outside the narrow third-party/excess verdict context. For example, in a case in which a disbarred attorney sought assignment of his client’s underinsured motorist-turned-bad faith claim, the Third Circuit specifically held that under 42 Pa. C.S. § 8371, bad faith claims can only be assigned to an injured plaintiff and judgment creditor. See Feingold v. Palmer & Barr , 831 F. App'x 608, 609 (3d Cir. 2020) (holding that bad faith claims may be assigned by statutory permission, but are not “freely assignable”). Feingold reaffirmed Wolfe ’s interpretation that, in the first-party property context, an insured may assign his bad faith claim only to a judgment creditor who has been injured.

On June 29, 2022, the U.S. District Court for the Eastern District of Pennsylvania issued an opinion which royally changes the Commonwealth’s interpretation of first-party property bad faith claims. In Royal Water Damage Restoration, Inc. a/a/o 1133 Columbia LLC v. State Farm Fire & Casualty Co. , WL 2345740 (E.D. Pa. June 29, 2022), the court decided that an insured’s water mitigation vendor has standing to bring a bad faith claim against the insurer—not on behalf of the insured, but directly as an injured party. Simply stated, the court has ruled, contrary to the precedent set in Wolfe and reconfirmed in Feingold , that an insured’s vendor—who is not a party to the insurance contract between the carrier and its insured—may pursue an extra-contractual claim under the Pennsylvania bad faith statute against the carrier.

On July 28, 2022, in another case involving Royal Water Damage Restoration, the Eastern District of Pennsylvania again permitted a third party’s standing to pursue a bad faith claim against an insurer. See Royal Water Damage Restoration, Inc. a/a/o Janet Thorn v. Allstate Vehicle and Property Insurance Co. , WL 2985637 (E.D. Pa. July 28, 2022). More pointedly, in this case, the court based its finding on the mere potential that a vendor “could potentially be” a judgment creditor, even if the property owner/named insured is the only party actually injured. It can be argued, however, that the Federal Rules of Civil Procedure, which govern who is permitted to bring a lawsuit, have not and were not meant to be bent for the sake of convenience. A plethora of case law since the enactment of the Federal Rules has held that a plaintiff must establish standing in order to bring any claim in suit, bad faith or otherwise. Allowing a party who has not sustained any actual injury to bring a claim for bad faith may circumvent the purpose of the federal rule on standing.

More concernedly, allowing insureds to assign their bad faith claims to vendors seeking payment for services on their property could open a floodgate of litigation directly against carriers who issue insurance policies with the specific understanding that the named insureds are the only parties to whom they owe any duties or obligations. A vendor that performs repair work on the insured property is neither an injured party nor a judgment creditor, particularly if no judgment has been rendered by a court. Widening the class of first-party bad faith plaintiffs to include vendors of insureds has the potential to significantly increase premiums.

Allowing any repair contractor—who is not a party to the contract and who was not considered in the underwriting process—to pursue a bad faith claim has the potential to profoundly change the first party property landscape in Pennsylvania. With the recent Royal Water decisions contorting Pennsylvania’s understanding of the bad faith statute, insurers should wait with bated breath for a case to reach the Third Circuit or Pennsylvania appellate courts to decide whether Pennsylvania will follow Florida down the assignment-of-benefits rabbit hole.

*Jim is a shareholder in our Philadelphia, Pennsylvania, office. He can be reached at 215.575.2635 or [email protected] .

Defense Digest , Vol. 28, No. 12, December 2022, is prepared by Marshall Dennehey to provide information on recent legal developments of interest to our readers. This publication is not intended to provide legal advice for a specific situation or to create an attorney-client relationship. ATTORNEY ADVERTISING pursuant to New York RPC 7.1. © 2022 Marshall Dennehey. All Rights Reserved. This article may not be reprinted without the express written permission of our firm. For reprints, contact [email protected] .

Federal Judge finds post loss assignment of benefits proper under Pennsylvania law

Richard gable jr..

Partner | Reinsurance , Extra-Contractual , Arson & Fraud , Subrogation & Recovery , First-Party Coverage , Aviation 267-507-1410 [email protected]

Overview | Blog Posts | First-Party Coverage | Richard Gable Jr. | Related | Print | Share

October 24, 2017

In a recent opinion, Judge Schmehl of the Eastern District of Pennsylvania denied a forced placed insurer’s Motion to Dismiss a suit brought by the assignee of a homeowner for water damage to the home. In  Williams v. American Surety Insurance Company , the subject home was damaged by water while the mortgage company was in the process of foreclosing on the home. The homeowner, who had been designated as “Borrower” under a forced placed insurance policy issued to the mortgage company, made a claim under the policy. After the home was subsequently purchased at Sheriff’s Sale, the new buyer obtained an assignment of the claim. The claim was denied and the purchaser brought suit.

In denying the insurer’s Motion to Dismiss, the court ruled that the policy’s anti-assignment clause only served to bar pre-loss assignments. The claim, being a fixed and vested right at the time of the loss, is assignable under Pennsylvania law. The court also rejected arguments relating to the timing of the assignment, finding that it was irrelevant that the original claimant had already sold the home at the time the assignment was made. The court found that the only issue that mattered was whether the assignor had an insurable interest at the time of the loss, which the court concluded she did.

Notably, the court cited with approval to the Florida decision of  One Call Prop. Servs., Inc. v. Security First Ins. Co., 165 So .2d 749 (Fla. 4th DCA 2015)  for the proposition that the assignable right accrues as of the date of loss even though payment may not be due. Florida courts are awash in the assignment of benefits (AOB) suits brought by restoration companies. While the avalanche of AOB cases in Florida is likely the product of the state’s unique one-way, fee-shifting statute (§ 627.428), it will be interesting to see whether decisions like  Williams  will encourage similar litigation in Pennsylvania. 

For any further questions, please contact Richard Gable, Jr.

Announcing our Newest Senior Associate: Shaheen Nouri

By Shaheen Nouri | News

May 2, 2024

Florida Supreme Court Answers Certified Question: Dram Shop Actions Are Negligence Actions

By Barry Burkett | Blog Posts

April 4, 2024

Texas Supreme Court Answers Certified Question in Favor of Insurer on Preclusion of Attorney’s Fees Under Texas Insurance Code Chapter 542A

By Jeffery Allcorn | Blog Posts

March 5, 2024

Analyzing AOBs: Are the Courts Splitting Hairs or Seeking Statutory Compliance?

By Kimberly Matot | Blog Posts , News

February 23, 2024

Bad Faith in Florida: Development of, and Changes to, First-Party Bad Faith Law

By William Collum | Events

January 26, 2024

Search NAIC

Recommended.

Back to Newsroom

Consumer Insight

Sept. 13, 2023

Assignment of Benefits: Consumer Beware

You've just survived a severe storm, or a tornado and you've experienced some extensive damage to your home that requires repairs, including the roof. Your contractor is now asking for your permission to speak with your insurance company using an Assignment of Benefits. Before you sign, read the fine print. Otherwise, you may inadvertently sign over your benefits and any extra money you’re owed as part of your claim settlement.

The National Association of Insurance Commissioners (NAIC) offers information to help you better understand insurance, your risk and what to do in the event you need repairs after significant storm damage.

Be cautious about signing an Assignment of Benefits. An Assignment of Benefits, or an AOB, is an agreement signed by a policyholder that allows a third party—such as a water extraction company, a roofer or a plumber—to act on behalf of the insured and seek direct payment from the insurance company.  An AOB can be a useful tool for getting repairs done, as it allows the repair company to deal directly with your insurance company when negotiating repairs and issuing payment directly to the repair company. However, an AOB is a legal contract, so you need to understand what rights you are signing away and you need to be sure the repair company is trustworthy.

• With an Assignment of Benefits, the third party, like a roofing company or plumber, files your claim, makes the repair decision and collects insurance payments without your involvement.
• Once you have signed an AOB, the insurer only communicates with the third party and the other party can sue your insurer and you can lose your right to mediation.
• It's possible the third party may demand a higher claim payment than the insurer offers and then sue the insurer when it denies your claim.
• You are not required to sign an AOB to have repairs completed. You can file a claim directly with your insurance company, which allows you to maintain control of the rights and benefits provided by your policy in resolving the claim.

Be on alert for fraud. Home repair fraud is common after a natural disaster. Contractors often come into disaster-struck regions looking to make quick money by taking advantage of victims.

• It is a good idea to do business with local or trusted companies. Ask friends and family for references.
•  Your insurer may also have recommendations or a list of preferred contractors.
• Always get more than one bid on work projects. Your adjuster may want to review estimates before you make repairs.

Immediately after the disaster, have an accurate account of the damage for your insurance company when you file a claim.

• Before removing any debris or belongings, document all losses.
• Take photos or video and make a list of the damages and lost items.
• Save damaged items if possible so your insurer can inspect them, some insurance companies may have this as a requirement in their policy.

Most insurance companies have a time requirement for reporting a claim, so contact your agent or company as soon as possible. Your  state insurance department  can help you find contact information for your insurance company, if you cannot find it.

• Insurance company officials can help you determine what damages are covered, start your claim and even issue a check to start the recovery process.
• When reporting losses, you will need insurance information, current contact information and a  home inventory or list of damaged and lost property . If you do not have a list, the adjuster will give you some time to make one. Ask the adjuster how much time you have to submit this inventory list. The NAIC Post Disaster Claims Guide has details on what you can do if you do not have a home inventory list.

After you report damage to your insurance company, they will send a claims adjuster to assess the damage at no cost to you . An adjuster from your insurance company will walk through and around your home to inspect damaged items and temporary repairs you may have made.

• A public adjuster is different from an adjuster from your insurance company and has no ties to the insurance company.
• They estimate the damage to your home and property, review your insurance coverage, and negotiate a settlement of the insurance claim for you.
• Many states require public adjusters to be licensed. Some states prohibit public adjusters from negotiating insurance claims for you. In those states, only a licensed attorney can represent you.
• You have to pay a public adjuster.
• The NAIC Post Disaster Claims Guide has information on the different types of adjusters.

Once the adjuster has completed an assessment, they will provide documentation of the loss to your insurer to determine your claims settlement. When it comes to getting paid, you may receive more than one check. If the damage is severe or you are displaced from your home, the first check may be an emergency advance. Other payments may be for the contents of your home, other personal property, and structural damages. Please note that if there is a mortgage on your home, the payment for structural damage may be payable to you and your mortgage lender. Lenders may put that money into an escrow account and pay for repairs as the work is completed.

More information. States have rules governing how insurance companies handle claims. If you think that your insurer is not responding in a timely manner or completing a reasonable investigation of your claim, contact your  state insurance department .

About the National Association of Insurance Commissioners

As part of our state-based system of insurance regulation in the United States, the National Association of Insurance Commissioners (NAIC) provides expertise, data, and analysis for insurance commissioners to effectively regulate the industry and protect consumers. The U.S. standard-setting organization is governed by the chief insurance regulators from the 50 states, the District of Columbia and five U.S. territories. Through the NAIC, state insurance regulators establish standards and best practices, conduct peer reviews, and coordinate regulatory oversight. NAIC staff supports these efforts and represents the collective views of state regulators domestically and internationally.

Pennsylvania Decides Again that Assignments of Bad Faith to Restorers are Valid

Pennsylvania federal court held that bad faith claims could be assigned to a third party, such as a restoration company, who alleged injury from the insurer’s conduct in adjusting the claim. .

State Farm Fire and Casualty Company (“State Farm”) insured 1133 Columbia LLC’s property (“Columbia”). Royal Water Damage Restoration (“Royal Water”) performed mitigation, remediation, and drying services after a water line burst, damaging the property. Columbia subsequently assigned its rights under the State Farm policy to Royal Water, which sued State Farm for breach of contract and statutory bad faith in the Philadelphia County Court of Common Pleas. State Farm moved to dismiss the bad faith claim, arguing that the bad faith claim could not be assigned. The Court denied the motion, allowing Royal Water to pursue the claim for bad faith and breach of contract against State Farm.

Columbia suffered a water line break, sustaining a loss to multiple units. Columbia submitted a timely claim to State Farm, which sent an adjuster to evaluate damages. Royal Water restored the property between December 2020 and February 2021. State Farm initially agreed with the scope of Royal Water’s work, and Royal Water billed State Farm $165,012.32 for its services.

After prior approval of the scope, State Farm sent Royal Water’s invoices to a Third Party vendor for an audit. The third-party was late to the project; thus, it only saw the completed site. Royal Water alleges the vendor’s “estimate for drying goals” was “an arbitrary number of days” and not “based on objective calculations as required by the Institute of Inspection Cleaning and Restoration Certification standards . . . .” (“IICRC”). Although Royal Water told State Farm three times that the third-party estimate did not comply with IICRC standards, State Farm paid Royal Water based on the estimate. 

Royal Water alleges that it has not been reimbursed approximately $45,000 for the reasonable expenses it incurred for its services because State Farm underestimated the extent of the damage. In addition, Royal Water alleges it is Columbia’s “creditor” because of “State Farm’s wrongful refusal to pay reasonable expenses” for Royal Water’s services. However, Royal Water did not allege there is an outstanding judgment for any unpaid amount. State Farm argues that Columbia’s assignment was invalid because Royal Water does not have an outstanding judgment.

Assignment of an Insurance Bad Faith Claim

Columbia “assigned any and all of its rights, benefits and causes of action” under its State Farm policy to Royal Water “to the extent [the restoration company] provided services” at the property. State Farm argued that case precedent in Pennsylvania required both the assignee being injured and the assignee is a judgment creditor (Allstate Prop. & Cas. Ins. Co. v. Wolfe (2014) 629 Pa. 444, 446 [105 A.3d 1181, 1182].) . The court held that State Farm’s interpretation of Wolfe is inconsistent with the broader reasoning behind it.

“Allowing Royal Water to stand in Columbia’s shoes serves “the salutary purposes of encouraging good faith settlement negotiations, and punishing insurance carrier abuse”

When the bad faith statute was enacted, the Supreme Court had allowed assignments of bad faith claims “for almost twenty-five years.” It did not believe the legislature intended to change the practice because, as drafted, the statute does not explicitly bar assignments. Allowing insureds to assign their bad faith claims serves the statute’s “aim of deterrence.” It does not encourage plaintiffs to “pursue unreasonable settlement demands” or claims that otherwise never would have been pursued. 

The court goes on to state that even if Wolfe limited assignments to “injured” third parties, Royal Water has plausibly alleged it “has actually sustained injury” from State Farm’s conduct and is not “an uninterested party to the insurance claim” pursuing litigation just “to create an economic benefit to it.” The Pennsylvania Federal Court then held that: Royal Water seeks to recover from State Farm’s refusal to pay “expenses it incurred for its services at the insured premises relative to the covered loss. “Allowing Royal Water to stand in Columbia’s shoes serves “the salutary purposes of encouraging good faith settlement negotiations, and punishing insurance carrier abuse.” Wolfe , 105 A.3d at 1186

Don’t Be Afraid to Question the Insurance Company’s Decisions

Carriers need an objectively reasonable justification for denial of claims decisions or they face liability for insurance bad faith.

Put your questions in writing and demand that the insurance company put its position in writing as well. The adjuster may justify their claims handling in one way on the phone but it’s a different matter when they have to reduce their decision to writing. Remember, once an insurer puts its position in writing if you end up having to sue the insurer for bad faith they will have a hard time changing their position.  If you don’t “get it in writing” you might be surprised how the adjuster’s version of what was said to you changes when they are under oath in a deposition or in court.

If the policyholder or assignee believes the insurance company is acting unreasonably and unfairly, then it is probably time to seek the advice of an experienced insurance bad faith lawyer. 

Watch and learn more about insurance bad faith below.

Ready to learn about Assignments of Insurance Rights and Benefits?

The Book on the Assignment of Benefits, 2nd ed. by Ed Cross, contains forms for every State, a letter to place the carrier on notice, along with a training guide explaining the ins and outs of executing and enforcing an assignment.

There is no greater way to empower a restorer to recover fair market value for restoration service than with a properly-drafted Assignment of Insurance Rights. Assignments allow restorers to cause insurance companies to pay a reasonable price for restoration service, and to pay a second time if the insurer sends the restorer’s money to the policyholder. 

Share this:

Similar posts.

1 minute tip on Mechanics Liens

A mechanic lien is a security interest against real property recorded in favor of a party who prepared or improved that real property. It constitutes an encumbrance against the legal title on the property. Liens are often invalid because they are not timely recorded. Don’t take chances or rely on guesswork when filing a lien. Read More

Don’t Be a Restoration Cannibal

Restorers complain that insurance companies pay too little and don’t treat them fairly, but some restorers contribute to the problem by pandering to insurance companies and foolishly undercutting the value of restoration services. Not only are these cannibal restorers driving down prices but they have started driving the homeowners against them too. Homeowners have started Read More

Cross-Examination: Who is in Charge of Setting Restoration Prices?

‘We Don’t Pay for That.’ Why DON’T you Pay for That? The insurance industry is legally required to adapt to what the restoration industry charges. It is not the other way around. Carriers need an objectively reasonable justification for denial of claims decisions or they face liability for insurance bad faith.  “When restorers allow insurers Read More

Navigating the Tricky Waters of the Michigan Builders Trust Fund Act

The Michigan Builders Trust Fund Act (MBTFA) can have a significant financial impact on Michigan restoration contractors. The MFBTA mandates that payments made by an owner to a contractor are to be held “in trust” for paying subcontractors, suppliers, and laborers. This means that if you’re a general contractor who has received project funds, you Read More

Law Offices of Ed Cross Now Serving Restorers in Michigan

Detroit, Michigan, May 17, 2023 – The Law Offices of Edward H. Cross is excited to announce that Michigan attorney, Angela Bajramaj, has joined the firm as a partner and will run the firm’s new office in Detroit. Angela is a restoration collections expert. For eight years before joining the firm, Angela served as Corporate Read More

Healthy Buildings Conference Bridges The Gap Between Research & Practice

Healthy Buildings America is LIVE AND IN-PERSON January 18-20, 2022, in Honolulu!!! This event brings leading scientists together with restorers for lively exchange about the latest methodologies and technologies. This groundbreaking conference will connect the scientific research of ISIAQ’s core membership with the experience of practitioners and technicians in the fields of IAQ pertaining to ventilation, Read More

Assignment of Benefits 50 State Chart

State Law Charts

Document Info

Published on Sep 30, 2019

AHIP Members login info box

AHIP Member Plan employees can log in to view additional content.

Don’t have a login? Register as a Member Plan employee.

Federal Judge finds post loss assignment of benefits proper under Pennsylvania law

In a recent opinion, Judge Schmehl of the Eastern District of Pennsylvania denied a forced placed insurer’s Motion to Dismiss a suit brought by the assignee of a homeowner for water damage to the home.  In  Williams v. American Surety Insurance Company , the subject home was damaged by water while the mortgage company was in the process of foreclosing on the home.  The homeowner, who had been designated as “Borrower” under a forced placed insurance policy issued to the mortgage company, made a claim under the policy.  After the home was subsequently purchased at Sheriff’s Sale, the new buyer obtained an assignment of the claim.  The claim was denied and the purchaser brought suit.

In denying the insurer’s Motion to Dismiss, the court ruled that the policy’s anti-assignment clause only served to bar pre-loss assignments.  The claim, being a fixed and vested right at the time of the loss, is assignable under Pennsylvania law.   The court also rejected arguments relating to timing of the assignment, finding that it was irrelevant that the original claimant had already sold the home at the time the assignment was made.  The court found that the only issue that mattered was whether the assignor had an insurable interest at the time of the loss, which the court concluded she did.

Notably, the court cited with approval to the Florida decision of  One Call Prop. Servs., Inc. v. Security First Ins. Co., 165 So .2d 749 (Fla. 4th DCA 2015)  for the proposition that the assignable right accrues as of the date of loss even though payment may not be due.  Florida courts are awash in assignment of benefits (AOB) suits brought by restoration companies.  While the avalanche of AOB cases in Florida is likely the product of the state’s unique one-way, fee shifting statute (§ 627.428), it will be interesting to see whether decisions like  Williams  will encourage similar litigation in Pennsylvania.

Latest Posts

• As The PIP World Turns: Insurance Carriers Do Not Have To Pay 100% Of The Billed Amounts Under Section 627.736, Florida Statutes
• Scheduling, Compliance, and Liaison Tasks under the Professional Services Exclusion
• Florida Supreme Court Answers Certified Question: Dram Shop Actions Are Negligence Actions
• New York Court Emphasizes the Importance of Notice in Subrogation
• One Or More Accidents Or Occurrences – That Is The Question – REDUX

See more »

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

Refine your interests »

Written by:

PUBLISH YOUR CONTENT ON JD SUPRA NOW

• Increased visibility
• Actionable analytics
• Ongoing guidance

Published In:

Butler weihmuller katz craig llp on:.

"My best business intelligence, in one easy email…"

Social Security

Program operations manual system (poms).

TN 10 (06-96)

SI 01730.040 Assignment of Rights for Medicaid Eligibility

A.  policy — applicant agreement.

Each State’s Medicaid plan requires that as a condition of eligibility for Medicaid, applicants must at the time of application:

Assign to the State any rights they may have (or any other Medicaid eligible may have for whom they can legally assign rights) to support and payment for medical care from any responsible third party (e.g., from an insurance company settling an accident claim);

Agree to cooperate in identifying and providing information to assist the State in pursuing any third party who may be liable to pay for care and services;

Agree to cooperate with the State in obtaining medical support and payments (e.g., signing papers necessary to pursue payments from absent parents); and

Agree to cooperate in establishing the paternity of a child born out of wedlock for whom the applicant can legally assign rights.

EXCEPTION: A woman need not agree to cooperate in establishing the paternity of a fetus she is carrying or for her child less than 60 days old.

NOTE: The Medicaid program uses the term “applicant” to refer to both “applicants” and “claimants”.

B.  Policy — SSA role

The requirement that SSA secure an individual’s assignment of rights applies only in section 1634 States.

SSA must inform applicants and recipients who move into section 1634 States from non-1634 States about the requirements in A. above and attempt to secure their assignment in States which do not have automatic assignment laws (see H. below). Assignment of rights (AOR) is discussed:

during the application path for aged claims and simultaneously developed disability/blindness claims,

at the pre-effectuation review contact (PERC) for a deferred claim following medical allowance,

during the first redetermination after a State’s section 1634 Agreement becomes effective with SSA, and

during the first FO contact with an eligible individual after moving into a section 1634 State from an SSI State or section 209(b) State. (See SI 01715.010A for a discussion of the three different types of States for Medicaid purposes.)

After AOR has been annotated on the record, there is no need to raise the issue again, unless the recipient wishes to change AOR status or the State requests our records to be changed.

NOTE: Some States have enacted automatic assignment laws which make completion of the AOR question unnecessary in applications (question 59(a), form SSA-8000-BK or in Modernized SSI Claims System (MSSICS) claims (see MSOM INTRANETSSI 019.020 )) and completion of Form SSA-169, “Assignment of Rights Statement” unnecessary in post-eligibility situations. States with automatic assignment laws are identified in H. below. They also may be discussed in Regional instructions.

C.  Definition of responsible third party

Responsible Third Party — Any insurance company, individual, entity, or program that is or may be liable to pay all or part of the expenditures that would otherwise be paid by Medicaid. (See SI 01730.045 for further discussion of third-party insurance.)

D.  Procedure — explanations

In section 1634 States, explain the AOR requirements in A. above in all aged and simultaneously developed applications, PERCs for deferred claims, and at the first post-eligibility contact with an individual who has moved from an SSI State or a section 209(b) State into a section 1634 State.

Do not attempt to personalize the requirements by using the second person “you must assign your rights. . . .” Just state that the AOR requirements must be met in order to become Medicaid eligible.

Never ask a woman if she is pregnant or if she has recently delivered a child out of wedlock. Just state the four requirements.

If the applicant wishes a detailed explanation of the AOR requirements, explain that he/she may contact the Medicaid State Agency for more detailed information. If the individual resides in a State which does not have automatic assignment (see E. below), explain that the individual has the right to refuse assignment, but the consequences of such a refusal will probably be a denial of Medicaid.

NOTE: Refusal to assign rights will not affect SSI, Social Security or Medicare benefits.

E.  Procedure — automatic assignment

1.  paper applications.

After explaining AOR, do not complete block 59(a) of the paper application in automatic assignment section 1634 States. Continue with the rest of block 59 and complete an SSA-8019-U2 (“Health Insurance Information Request”, SI 01730.045 ) when the claimant/beneficiary alleges third-party health insurance.

2.  MSSICS Applications

In MSSICS claims, code BMEN with a “Y” to bring up the BHLT screen. Code BHLT (see MSOM INTRANETSSI 019.020) with an “A” for automatic.

3.  Post-Eligibility Situations

In post-eligibility (PE) situations when there is no assignment of rights (AOR) coding on the SSR:

do not get a signed SSA-169 (“Assignment of Rights Statement”), instead,

read the AOR statement on the SSA-169 or the SSA-8000-BK to an individual, and

ask if the recipient has any third-party health insurance (not Medicare or Medicaid). (See SI 01730.045C.3. for guidance on redeterminations.)

For MSSICS 4.4 and later, when a recipient moves into an automatic assignment State from a nonsection 1634 State, read the assignment of rights statement, code BMEN with a “Y” and BHLT (see MSOM INTRANETSSI 019.020) with an “A” for automatic.

F.  Procedure — nonautomatic assignment states

After explaining AOR, complete block 59(a) in paper applications in section 1634 States. If “Yes” to block 59(a), continue with the rest of block 59 and complete an SSA-8019-U2 (see SI 01730.045 ) when appropriate. If the individual refuses assignment of rights in block 59(a), explain again that refusal will probably result in a Medicaid denial and skip the remainder of block 59. Code an “A” in the PT field of the SSA-450-SI (“SSI Data Input and Determination”). (See SM 01005.350 ff. about assuring proper coding in the PT field.)

If a claimant who refused AOR changes the decision and the claim has not yet been completed, amend the application with a completed SSA-169 and file in the claims folder.

2.  MSSICS Claims

In MSSICS claims, enter “Y” on the BMEN question (“Health Expenses”) to bring up the BHLT screen.

NOTE: An entry of “N” will prevent appearance of the BHLT screen.

Code BHLT (see MSOM INTRANETSSI 019.020) with a “Y” for Yes (agrees to AOR) or an “N” for No (does not agree to AOR). If “N”, provide the reason for refusal, if possible (see MSOM INTRANETSSI 019.020).

In pending MSSICS claims, if the claimant changes the AOR refusal, retrieve BHLT and change the decision. Otherwise, use a PR-9 transmission to change the decision.

3.  Post-Eligibility, Paper

In non-MSSICS PE situations when a beneficiary moves from an SSI State or Section 209(b) State into a nonautomatic assignment section 1634 State or SSA implements a section 1634 Agreement with a State, have the individual sign an SSA-169 after the explanation. Route the signed SSA-169 for filing in the claims folder. Ask if the beneficiary has third-party health insurance (i.e., not Medicare or Medicaid) or if someone is responsible for medical expenses. If the recipient alleges third-party insurance or someone is responsible for medical expenses, complete an SSA-8019-U2 and route as instructed in SI 01730.045 .

If the recipient refuses AOR, have the individual sign an SSA-795 explaining his or her wish to refuse assignment of rights and the understanding that refusal will probably result in being found ineligible for Medicaid. Use a PR-9 transmission to place this information on the SSR. (See SM 01005.350 ff. about assuring proper coding in the PT field.) Post-eligibility refusals to assign rights will require a manual notice. Suppress any automated notice and prepare the manual notice using Medicaid paragraph 1149 in NL 00804.110 . (See NL 00801.010C for notice suppression references.)

If a recipient changes the AOR decision, use a PR-9 transmission.

NOTE: A change from agreement to refusal must be taken on a signed SSA-795. A change from refusal to agreement to assign should be annotated on an SSA-169 if the change is taken from the recipient or the representative payee. A State report that the individual has changed from refusal to agreement may be recorded on a report of contact.

4.  Post-Eligibility, MSSICS

In MSSICS 4.4 or later, if an individual reports moving into a nonautomatic assignment section 1634 State, explain assignment of rights and obtain concurrence. Complete the BMEN question with a “Y”, and answer the BHLT question about AOR with a “Y” or an “N” as appropriate. If the answer to BHLT is “Y”, proceed to TPL. If the answer to the BHLT assignment question is “N”, provide the reason for refusal, if possible, and you will have to suppress any automated notice and issue a manual notice using Medicaid paragraph 1149 in NL 00804.110 . (See NL 00801.010C for notice suppression references.)

G.  Procedure — workflow

See SI 01730.050A , Exhibit 1, for a workflow diagram of the AOR process.

H.  List of automatic assignment states

As of the date of this transmittal, the automatic assignment section 1634 States are:

Automatic assignment procedures result from a State notifying the Centers for Medicare & Medicaid Services (CMS) that it wishes the signed AOR statement to be waived because of State law. CMS then notifies SSA when a section 1634 State no longer requires a signed AOR statement.

• Received a document?

Assignment of Benefits for Contractors: Pros & Cons of Accepting an AOB

22 articles

Insurance , Restoration , Slow Payment

When a property owner files an insurance claim to cover a restoration or roofing project, the owner typically deals directly with the insurance company. They may not have the funds available to pay the contractor out of pocket, so they’re counting on that insurance check to cover the construction costs.

But insurance companies often drag their feet, and payments can take even longer than normal. Contractors often wish they could simply deal with the insurance company directly through an assignment of benefits. In some circumstances, an AOB can be an effective tool that helps contractors collect payment faster — but is it worth it?

In this article, we’ll explain what an assignment of benefits is, and how the process works. More importantly, we’ll look at the pros and cons for restoration and roofing contractors to help you decide if an AOB is worth it . 

What is an assignment of benefits? 

An assignment of benefits , or AOB, is an agreement to transfer insurance claim rights to a third party. It gives the assignee authority to file and negotiate a claim directly with the insurance company, without involvement from the property owner. 

An AOB also allows the insurer to pay the contractor directly instead of funneling funds through the customer. AOBs take the homeowner out of the claims equation.

Here’s an example: A property owner’s roof is damaged in a hurricane. The owner contacts a restoration company to repair the damage, and signs an AOB to transfer their insurance rights to the contractor. The contractor, now the assignee, negotiates the claim directly with the insurance company. The insurer will pay the claim by issuing a check for the repairs directly to the restoration contractor. 

Setting up an AOB

A property owner and contractor can set up an assignment of benefits in two steps: 

• The owner and the contractor sign an AOB agreement
• The contractor sends the AOB to the insurance company

Keep in mind that many states have their own laws about what the agreement can or should include .

For example, Florida’s assignment of benefits law contains relatively strict requirements when it comes to an assignment of benefits: 

• The AOB agreements need to be in writing. The agreement must contain a bolded disclosure notifying the customer that they are relinquishing certain rights under the homeowners policy. You can’t charge administrative fees or penalties if a homeowner decides to cancel the AOB. 
• The AOB must include an itemized, per-unit breakdown of the work you plan to do. The services can only involve how you plan to make repairs or restore the home’s damage or protect the property from any further harm. A copy must be provided to the insurance company. 
• A homeowner can rescind an AOB agreement within 14 days of signing, or within 30 days if no work has begun and no start date was listed for the work. If a start date is listed, the 30-day rule still applies if substantial progress has not been made on the job. 

Before signing an AOB agreement, make sure you understand the property owner’s insurance policy, and whether the project is likely to be covered.

Learn more: Navigating an insurance claim on a restoration project

Pros & cons for contractors

It’s smart to do a cost-benefit analysis on the practice of accepting AOBs. Listing pros and cons can help you make a logical assessment before deciding either way. 

Pro: Hiring a public adjuster

An insurance carrier’s claims adjuster will inspect property damage and arrive at a dollar figure calculated to cover the cost of repairs. Often, you might feel this adjuster may have overlooked some details that should factor into the estimate. 

If you encounter pushback from the insurer under these circumstances, a licensed, public adjuster may be warranted. These appraisers work for the homeowner, whose best interests you now represent as a result of the AOB. A public adjuster could help win the battle to complete the repairs properly. 

Pro: More control over payment

You may sink a considerable amount of time into preparing an estimate for a customer. You may even get green-lighted to order materials and get started. Once the ball starts rolling, you wouldn’t want a customer to back out on the deal. 

Klark Brown , Co-founder of The Alliance of Independent Restorers, concedes this might be one of the very situations in which an AOB construction agreement might help a contractor. “An AOB helps make sure the homeowner doesn’t take the insurance money and run,” says Brown.  

Pro: Build a better relationship with the homeowner

A homeowner suffers a substantial loss and it’s easy to understand why push and pull with an insurance company might be the last thing they want to undertake. They may desire to have another party act on their behalf. 

As an AOB recipient, the claims ball is now in your court. By taking some of the weight off a customer’s shoulders during a difficult period, it could help build good faith and further the relationship you strive to build with that client. 

Learn more : 8 Ways for Contractors to Build Trust With a Homeowner

Con: It confuses payment responsibilities

Even if you accept an AOB, the property owner still generally bears responsibility for making payment. If the insurance company is dragging their feet, a restoration contractor can still likely file a mechanics lien on the property .

A homeowner may think that by signing away their right to an insurance claim, they are also signing away their responsibility to pay for the restoration work. This typically isn’t true, and this expectation could set you up for a more contentious dispute down the line if there is a problem with the insurance claim. 

Con: Tighter margins

Insurance companies will want repairs made at the lowest cost possible. Just like you, carriers run a business and need to cut costs while boosting revenue. 

While some restoration contractors work directly with insurers and could get a steady stream of work from them, Brown emphasizes that you may be sacrificing your own margins. “Expect to accept work for less money than you’d charge independently,” he adds. 

The takeaway here suggests that any contractor accepting an AOB could subject themselves to the same bare-boned profit margins. 

Con: More administrative work

Among others, creating additional administrative busywork is another reason Brown recommends that you steer clear of accepting AOBs. You’re committing additional resources while agreeing to work for less money. 

“Administrative costs are a burden,” Brown states. Insurers may reduce and/or delay payments to help their own bottom lines. “Insurers will play the float with reserves and claims funds,” he added. So, AOBs can be detrimental to your business if you’re spending more while chasing payments. 

Con: Increase in average collection period

Every contractor should use some financial metrics to help gauge the health of the business . The average collection period for receivables measures the average time it takes you to get paid on your open accounts. 

Insurance companies aren’t known for paying claims quickly. If you do restoration work without accepting an AOB, you can often take action with the homeowner to get paid faster. When you’re depending on an insurance company to make your payment, rather than the owner, collection times will likely increase.

The literal and figurative bottom line is: If accepting assignment of benefits agreements increases the time it takes to get paid and costs you more in operational expense, these are both situations you want to avoid. 

Learn more: How to calculate your collection effectiveness 

AOBs and mechanics liens

A mechanics lien is hands down a contractor’s most effective tool to ensure they get paid for their work. Many types of restoration services are protected under lien laws in most states. But what happens to lien rights when a contractor accepts an assignment of benefits? 

An AOB generally won’t affect a contractor’s ability to file a mechanics lien on the property if they don’t receive payment. The homeowner is typically still responsible to pay for the improvements. This is especially true if the contract involves work that wasn’t covered by the insurance policy. 

However, make sure you know the laws in the state where your project is located. For example, Florida’s assignment of benefits law, perhaps the most restrictive in the country, appears to prohibit an AOB assignee from filing a lien. 

Florida AOB agreements are required to include language that waives the contractor’s rights to collect payment from the owner. The required statement takes it even further, stating that neither the contractor or any of their subs can file a mechanics lien on the owner’s property. 

On his website , Florida’s CFO says: “The third-party assignee and its subcontractors may not collect, or attempt to collect money from you, maintain any action of law against you, file a lien against your property or report you to a credit reporting agency.”

That sounds like a contractor assignee can’t file a lien if they aren’t paid . But, according to construction lawyer Alex Benarroche , it’s not so cut-and-dry.

“Florida’s AOB law has yet to be tested in court, and it’s possible that the no-lien provision would be invalid,” says Benarroche. “This is because Florida also prohibits no-lien clauses in a contract. It is not legal for a contractor to waive their right to file a lien via an agreement prior to performance.” 

Learn more about no-lien clauses and their enforceability state-by-state

Remember that every state treats AOBs differently, and conflicting laws can create additional risk. It’s important to consult with a construction lawyer in the project’s state before accepting an assignment of benefits. 

Best practices for contractors 

At the end of the day, there are advantages and disadvantages to accepting an assignment of benefits. While it’s possible in some circumstances that an AOB could help a contractor get paid faster, there are lots of other payment tools that are more effective and require less administrative costs. An AOB should never be the first option on the table . 

If you do decide to become an assignee to the property owner’s claim benefits, make sure you do your homework beforehand and adopt some best practices to effectively manage the assignment of benefits process. You’ll need to keep on top of the administrative details involved in drafting AOBs and schedule work in a timely manner to stay in compliance with the conditions of the agreement. 

Make sure you understand all the nuances of how insurance works when there’s a claim . You need to understand the owner’s policy and what it covers. Home insurance policy forms are basically standardized for easy comparisons in each state, so what you see with one company is what you get with all carriers. 

Since you’re now the point of contact for the insurance company, expect more phone calls and emails from both clients and the insurer . You’ll need to have a strategy to efficiently handle ramped-up communications since the frequency will increase. Keep homeowners and claims reps in the loop so you can build customer relationships and hopefully get paid faster by the insurer for your work.

Ask an expert for free

I am doing some part-time administrative work for a friend who has an owner/operator pressure washing business located in NC in its first year of business. Recently, my friend has expressed interest in expanding his operations to FL so that he can eventually live and work between both...

I am a homeowner, 4 days prior to Ida, we had solar panels installed. Half were damaged and blown off of course, so after we allowed the solar panel co to do our roof and redo our panel system. After a year, they finally replaced our roof and...

I believe a person was impersonating as a licensed general contractor. When I verified the license in GA, the license belonged to a completely different individual. When I called the provided insurance carrier of the general contractor, the insurance company said the company did not have an active...

Thomas Tracy

View Profile

About the author

Recommended for you

The ultimate guide to lien waivers in construction.

What are lien waivers in construction? This article is the ultimate guide for construction lien waivers including essential information and...

Construction Punch Lists Explained

Punch list work might seem minor, but it has an improportionate impact on payment. Without getting punch work out of...

What Is a Construction Schedule of Values? [Free Template Download]

A Schedule of Values is an essential tool used in construction project accounting that represents a start-to-finish list of work...

Construction Contracts: Pros and Cons of a Cost-Plus Contract

What is a cost-plus contract and how is it used in the construction industry? This type of contract is also...

The Ultimate Guide to Retainage in the Construction Industry

The practice of retainage, aka retention, has a tremendous impact on the construction industry. Learn how retainage works on different...

What Is a Work in Progress Schedule? | Construction Accounting

The Work In Progress (WIP) schedule is an accounting schedule that's a component of a company's balance sheet. It's calculated...

Do I Have to Sign a Lien Waiver to Get Paid?

Lien waivers are an important part of optimizing construction payment. Property owners and GCs rely on waivers to manage the...

What are the Certified Payroll Requirements for Federal Construction Jobs?

What does Certified Payroll mean? This post covers the certified payroll requirements for contractors working on federal construction projects.

Understanding Pennsylvania Assigned Claims Plan Benefits By Foley Law Firm on September 21, 2017

If you are deemed an eligible claimant, you may recover a maximum of $5,000 in medical benefits and $15,000 in losses or damages suffered. Our lawyers at Foley Law Firm are equipped to handle personal injury lawsuits and will seek the compensation you deserve. To get a better understanding of the Pennsylvania Assigned Claims Plan benefits and whether you qualify, continue reading.

Who Is Considered an Eligible Claimant?

As set forth in 75 Pa.C.S. § 1752, there are specific requirements you must meet in order to recover funding from the Assigned Claims Plan. One of our personal injury lawyers must determine whether:

• You are a resident of Pennsylvania.
• You have been injured in a vehicle accident that occurred in Pennsylvania.
• You do not own a vehicle registered under Chapter 13.
• You are not the operator/occupant of a vehicle owned by the Federal Government, any of its organizations, authorities, or departments.
• You are not the operator/occupant of a vehicle owned a by a self-insurer or an individual or entity exempt from liability for benefits.
• You are not permitted to receive first party benefits under section 1711 (required benefits) or 1712 (availability of benefits) pertinent to the injury that occurred from the auto accident.
• You are not the operator/occupant of a recreational vehicle unintended for highway use, motorcycle, motor-driven cycle, motorized pedal cycle, or similar vehicle that is to be registered under this title.

In addition, the lawyer must also determine whether there were grounds for ineligibility. As the eligible claimant under subsection (a), you shall be ineligible to recover benefits from the Assigned Claims Plan if any of the following contributed to your injury:

• The injury occurred as a result of you intentionally injuring yourself or another, or attempting to intentionally injure yourself or another.
• The injury occurred while engaged in a felony.
• The injury occurred while seeking to elude lawful arrest by law enforcement.
• The injury occurred while intentionally converting a vehicle.

What Is the Statute of Limitations?

In order to qualify for benefits under the Assigned Claims Plan, eligible claimants must file a claim within four years of the accident, or it will be considered outside the statute of limitations. You can refer to 75 Pa.C.S. § 1757(a) for more information. If the eligible claimant is a minor when the injury occurs, the claim must be filed within four years of the claimant turning 18 years old (see 75 Pa.C.S. § 1757(b) for more details).

To determine your rights and if you are an eligible clamant, we encourage you to schedule your consultation with one of our skilled personal injury lawyers at Foley Law Firm. The sooner legal action is taken, the greater your chances of receiving the compensation you deserve. Please contact us today online or give us a call at (800) 523-6539.

Related to This

• All Blog Posts
• Personal Injury
• Auto Accidents

• Foley Law Firm

The attorneys of the Foley Law Firm provide committed personal injury representation to eastern Pennsylvania. Our firm is proud to be affiliated with prominent organizations, including:

• Martindale-Hubbell®
• U.S. News & Nightly Reports
• Super Lawyers
• Lawdragon 

If you are looking for legal representation from a top-rated personal injury law firm in Scranton, call us at (800) 523-6539 or request a consultation online .

We have 2 locations in Northeastern Pennsylvania, with home visits available if necessary

Contact Us Today

Rate, Review & Explore

*Disclaimer: the information provided by this website is for informational purposes only and should not be considered legal advice or a substitute for competent legal counsel.

©2024 Foley Law Firm | Forever Website ® 2.0 | Designed & Developed by Einstein Law

Sitemap | Privacy Policy | Login

About Foley Law

• Medical Malpractice

Vehicle Accidents

• Kevin P. Foley
• Michael J. Foley
• Thomas J. Foley, III
• Tom Foley Jr.
• Scranton Office
• Stroudsburg Office
• Birth Injury
• Hospital Errors
• Medication Errors
• Misdiagnosis and Failure to Diagnose
• Nursing Home Malpractice
• Construction Accident
• Personal Injury Monroe County
• Premises Liability/Slip and Fall Accidents
• Product Liability
• Spinal Cord Injury
• Workers Compensation
• Wrongful Death
• Motor Vehicle Accidents
• Bicycle Accidents
• Car Accidents
• Motorcycle Accidents
• Pedestrian Accidents
• Trucking Accidents

(570) 342-8194

(570) 424-1757

More Contact Info

538 Biden St Ste 200 Scranton, PA 18503

Open Today 24 hours

26 N Sixth St 2nd Fl Stroudsburg, PA 18360

View All Locations

Tell us a bit about yourself...

(800) 523-6539 Send a message

• Defective Products
• Construction Accidents
• Brain Injury
• Car Accident Lawyer
• Nursing Home Abuse
• Quadriplegia
• Drunk Driving Accident
• Elder Abuse
• Driver Fatigue
• Personal Injury Law
• Unemployment
• Pennsylvania
• Work Injury
• Truck Accidents
• Punitive Damages
• Slip And Fall Accidents
• Slip And Fall
• Personal Injury Attorney
• Signs That Another Driver Is Texting
• Ski Resort Accident And Injury Lawsuit
• Product Liability Attorney
• Signs Of Nursing Home Abuse And Neglect
• Philadelphia Magazine
• Poconos Car Accidents
• Safety Tips For Road Trips
• Spring Driving Tips
• Terrence Nealon Jr
• Stages Of A Personal Injury Case
• Workers Compensation Insurance
• Wilkes Barre Truck Accidents
• Who Is Liable After A Parking Lot Injury
• What To Do If You Think Your Child Suffered A Birth Injury
• What To Do After A Car Accident
• Vehicle Defects
• Uninsured Motorists
• Underinsured Motorists
• Types Of Damages That Can Be Claimed In A Product Liability Claim
• Trucking Accidents And Driver Fatigue
• Truck Accidents Involving A Lack Of Driver Training
• Truck Accidents In Monroe County
• Truck Accidents Caused By Oversized Loads
• Truck Accident Attorney
• Truck Accident
• Traumatic Brain Injuries And Concussions
• Pennsylvania Move Over Law
• Teen Drivers Are The Riskiest And Tend To Drive The Least Safe Vehicles
• T Bone Car Accidents
• Surgical Mistakes
• Surgical Errors
• Personal Injuries And Chronic Back Pain
• Anesthesia Errors
• Pennsylvania Is A Modified Comparative Negligence State
• Car Accidents In Wilkes Barre
• Depuy Synthes
• Dental Malpractice
• Delayed Diagnosis Lawsuit
• Defective Car Seats
• Dashboard Cameras As Evidence In Personal Injury Cases
• Colorectal Cancer Misdiagnosis
• Catastrophic Injury
• Car Insurance Costs After An Accident
• Car Crashes
• Car Accidents Involving Fire Trucks
• Car Accidents And Turnpikes
• Car Accidents And Road Construction
• Car Accidents And Guardrails
• Car Accident Lawyers
• Car Accident Claims Process
• Calculating Future Damages In Personal Injury Cases
• Burn Injury
• Brachial Palsy
• Bike Accidents
• Auto Insurance
• Auto Accident
• Distracted Driving
• Drunk Driving
• Pennsylvania County Car Crashes
• Pennsylvania Car Accidents
• Pediatric Malpractice
• Pedestrian Accident
• Annual Roadmap Of State Highway Safety Laws Report Recommendations For Improved Safety In Pennsylvania
• Neck Injury
• Medical Malpractice Statistics
• Medical Malpractice And Failure To Perform A C Section
• Medical Malpractice And Failure To Diagnose
• Medical Malpractice And Brain Injury
• DUI And Lack Of Probable Cause
• Life After Cancer
• Liability For Slips And Falls On Icy Surfaces
• Legal Claim For Multi Vehicle Crash On Icy Road
• Large Truck Accidents
• Importance Of Motorcycle Safety Course For Riders
• Impairment Rating Examination
• Healthcare Associated Infections
• Fear Of Recurrence After Cancer Treatment
• Fault In A Multi Car Crash
• DUI Field Sobriety Tests
• Wrongful Termination
• Request a Consultation
• View All Pages

• Legal Updates

Pennsylvania Court Prohibits Commercial Assignments of Legal Malpractice Claims

Lawyers for the profession® alert.

Frank v. TeWinkle , ___ A.3d ___, 2012 WL 1851008 (Pa. 2012)

Brief Summary

The Superior Court of Pennsylvania held that agreements under which assignors assigned their legal malpractice claims against their former attorneys were champertous and thus invalid. 

Complete Summary

This case arose from two separate lawsuits filed by plaintiff, a former Pennsylvania attorney whose license had been suspended since 1988. Through an advertisement for a company, plaintiff lawyer solicited the assignment of the claims of two men against their former personal injury attorneys. Defendants claimed that plaintiff attorney was engaged in the unauthorized practice of law, as evidenced by the advertisement and the “Assignment of Claims and Choses in Action” in which plaintiff lawyer agreed to pay the assignors a percentage of the net proceeds recovered in the legal malpractice actions. The trial court dismissed plaintiff attorney’s complaints on the basis that the claims were champertous and void as against public policy. The trial court explained that the common law doctrine of champerty remains a viable defense in Pennsylvania. Applying that doctrine to the assignments in these cases, the trial court dismissed plaintiff client’s claims on the basis that the claims were champertous.

The appellate court noted that long considered repugnant to public policy against profiteering and speculating in litigation, champerty is defined by Black’s Law Dictionary (8th ed.) as:

[a]n agreement between an officious intermeddler in a lawsuit and a litigant by which the intermeddler helps pursue the litigant’s claim as consideration for receiving part of any judgment proceeds; . . . an agreement to divide litigation proceeds between the owner of the litigated claim and a party unrelated to the lawsuit who supports or helps enforce the claim.

In Hedlund Mfg. v. Weiser , Stapler & Spivak , 517 Pa. 522, 539 A.2d 357 (1988), the Pennsylvania Supreme Court approved the assignment of legal malpractice claims, holding that “[w]e will not allow the concept of the attorney client relationship to be used as a shield by an attorney to protect him or her from the consequence of legal malpractice.” In Hedlund , however, the assignee was not a stranger to the litigation, and it held a legitimate interest in the lawsuit.

Here, the court held that plaintiff lawyer had no legitimate interest in the underlying personal injury actions. Plaintiff lawyer was and still remained a “stranger” to those lawsuits, whose only interest in the underlying cases arose well after the cases were complete. Afterward, upon solicitation, plaintiff lawyer purchased assignments with the exclusive intent to institute claims against the assignors’ attorneys in consideration of which plaintiff lawyer agreed to share in a percentage of the recovery. The court thus concluded that while claims against attorneys may be assigned under Pennsylvania law under certain circumstances, champerty is still a viable defense to those claims.

Significance of Opinion

This decision is noteworthy for the fact that although assignments of legal malpractice actions are allowed under certain circumstances in Pennsylvania, champerty is still a valid defense to an assignment in a case filed by an intermeddler and stranger to the attorney-client relationship.

For further information, please contact Terrence P. McAvoy .

Download PDF

This alert has been prepared by Hinshaw & Culbertson LLP to provide information on recent legal developments of interest to our readers. It is not intended to provide legal advice for a specific situation or to create an attorney-client relationship.

• Recent News
• Newsletters
• Subscribe for Insights
• Terrence P. McAvoy
• Counselors for the Profession
• Lawyers for the Profession®
• Litigators for the Profession®

We value your privacy, and we use cookies on this site to enhance your user experience. By clicking the Accept button, you agree to the terms of the Hinshaw & Culbertson LLP Privacy Policy and Disclaimer .

Overhaul of Pa.’s Equal Pay Law clears House

• Published: May. 06, 2024, 8:28 p.m.
• Zack Hoopes | [email protected]

An overhaul of Pennsylvania’s Equal Pay Law — amending the statute to include race and ethnicity, protections for pay history, stiffer penalties, and more — passed the state House Monday on a party-line vote.

“This is a step toward economic justice,” said Rep. Donna Bullock, D-Philadelphia. “We moved this legislation forward to ensure all Pennsylvania workers receive equal pay for equal work and eradicate wage disparity once and for all. It’s time for the Senate to do the same.”

The bill’s future in the Republican-controlled Senate is less certain, particularly given the unified opposition Monday from the GOP minority in the House, whose members voiced fears that the proposal was too far-reaching and would be difficult for employers to follow.

The Pennsylvania Equal Pay Law dates to 1959, and in its current form forbids wage discrimination on the basis of sex. The bill passed by House Democrats on Monday would expand this to race and ethnicity, and remove an exemption for employees covered by the federal minimum wage law (federal hourly wage laws include a prohibition on sex discrimination but not race and ethnicity).

State Rep. Donna Bullock, D-Philadelphia, said Monday that a bill voted on in the House to overhaul Pennsylvania’s Equal Pay Law would 'ensure all Pennsylvania workers receive equal pay for equal work and eradicate wage disparity once and for all. It’s time for the Senate to do the same.' Dan Gleiter | [email protected]

The bill would also replace a number of definitions in the existing law, changing the current standard of “equal skill, effort and responsibility” to simply say that employees cannot be paid differently for “comparable work” solely because of their sex, race, or ethnicity.

The bill also provides much more detailed definitions for allowable pay differentials, such as those based on seniority and merit; these include specifying that job title alone is not sufficient justification for unequal pay, and that family and medical leave cannot be counted against seniority.

Employers would also be forbidden under the bill from requiring prospective employees to disclose their wage history or from retaliating against employees who discuss their wages, among other protections intended to prevent employers from low-balling workers’ pay.

Further, the bill would give the Pennsylvania Department of Labor and Industry subpoena power in equal pay investigations, and hike fines for violators to a minimum of $2,500 and a maximum of $5,000 per employee per day, in addition to punitive damages paid to the employee.

The labor department would need an additional $1.2 million to hire a dozen extra investors to handle the expanded law, according to a House staff note, plus $2 million for database upgrades to track claims.

The median woman who works full time in Pennsylvania earns about 82% of the equivalent male worker, according to federal data , on par with the national ratio. This gap has remained relatively constant for the last 20 years, according to federal numbers, after the gender pay gap narrowed significantly in the 1980s and ‘90s.

That gap cannot be entirely explained by maternal breaks in employment or education differences that would make women’s jobs less lucrative, according to a recent analysis from Pew Research . Pay disparity with men is roughly the same for women with children as it is for those without, Pew found; the gap gets wider as women age and has not narrowed in proportion with the increased number of women going to college over the past several decades.

Similar gaps are also seen between racial groups, the analysis found, with Black and Hispanic women seeing the largest pay inequality relative to white men.

Read more political news

• US Senate candidate Dave McCormick stumps in Central Pa. with broad criticisms of President Biden
• Economy is No. 1 issue for voters, and that’s not good for Biden: Pa. poll
• GOP lawmakers make renewed pitch for school vouchers in Pa.

If you purchase a product or register for an account through a link on our site, we may receive compensation. By using this site, you consent to our User Agreement and agree that your clicks, interactions, and personal information may be collected, recorded, and/or stored by us and social media and other third-party partners in accordance with our Privacy Policy.

The Federal Register

The daily journal of the united states government, request access.

Due to aggressive automated scraping of FederalRegister.gov and eCFR.gov, programmatic access to these sites is limited to access to our extensive developer APIs.

If you are human user receiving this message, we can add your IP address to a set of IPs that can access FederalRegister.gov & eCFR.gov; complete the CAPTCHA (bot test) below and click "Request Access". This process will be necessary for each IP address you wish to access the site from, requests are valid for approximately one quarter (three months) after which the process may need to be repeated.

An official website of the United States government.

If you want to request a wider IP range, first request access for your current IP, and then use the "Site Feedback" button found in the lower left-hand side to make the request.