assignment of insurance claim to buyer

Selling Your Home With An Open Insurance Claim

May 1, 2020

The Importance of Documentation When Selling Your Home With An Open Insurance Claim

By Kyle Hyman

Selling your home during the pendency of an open homeowner’s insurance claim can raise a lot of legal questions. Whether you intend to retain the right to receive insurance benefits under the policy or assign them to the new buyer, it’s important that you document the damages and make necessary disclosures to protect your legal and financial interests.  Here are some pointers on what to document when selling our home with an open insurance claim to ensure you recover what you are owed.

First, it is important to disclose to your realtor that you have an open insurance claim before listing your home. Concealing damage or known problems at your property from potential buyers can land you in hot water. Generally, Florida law requires that sellers disclose facts or conditions which are not readily apparent and that have a material impact on the value and desirability of the property. Therefore, it is good practice to complete a seller’s disclosure form to clearly document to the buyer that there is unrepaired damage to the property.  Notice of an open insurance claim should also be given to the buyer because it may affect their ability to get new insurance while there is an open claim.

If the buyer is aware of the open insurance claim and still wants to move forward with the sale, you have a few options. For instance, you may choose to assign the insurance claim to the new buyer so that they can receive the insurance proceeds directly from the insurance carrier. Post-loss assignments of insurance claims in connection with the sale of a property are not overly complicated, but it is always best to have an attorney review the agreement prior to signing. Failure by the parties to clearly convey their intent to transfer the right to receive benefits could render the assignment unenforceable and take away the buyer’s standing to obtain the benefits owed in court. 

Another option is to maintain the insurance claim in your name and sell the property for a reduced amount. If you decide to go this route, be sure to clearly state in the sale documents how much you are reducing the price of the home for due to the unrepaired damage. This will help establish a more exact estimation of the cost to repair and substantiate the basis for the reduction in price. Once again, a seller’s disclosure form comes in handy to show (1) the buyer was on notice of the damages at the time of the sale and (2) that the cost to repair was contemplated in the reduced sale price. Your realtor should also be able to provide you with comparable sales in your area to help determine the fair market value of your home had repairs been performed. 

You will also want to have a general contractor, professional estimator, or an experienced insurance appraiser evaluate the damages prior to the sale. A detailed, line-item estimate will verify the cost to repair and be useful when trying to determine the actual cash value of the damaged property. Similarly, if your insurance carrier is disputing coverage or the cause of the loss, you may want to have a licensed engineer inspect your property. Determining cause of loss is crucial to coverage disputes and you may not have an opportunity to evaluate the damages again once the home is sold and repairs performed by the new buyer.

As Denzel Washington so perfectly stated in the movie Training Day , “It’s not what you know, but what you can prove.” Properly documenting damage and the terms of the sale agreement can substantially affect the outcome of your insurance claim. When in doubt, consult an attorney to discuss your legal rights and obligations to make sure you are adequately protecting your interests. 

Kyle Hyman, Esq.

Learn more about Kyle here!

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Can You Assign Your Insurance Benefits to Someone Else?

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Most business insurance policies contain a so-called anti-assignment clause. This clause prohibits policyholders from transferring any of their rights under the policy to someone else. This means that the insured business cannot cede its right to collect claim payments to another party. However, laws in most states permit policyholders to transfer their rights to another party under certain circumstances.

Anti-Assignment Clause

In the standard ISO policies , the anti-assignment clause is located in a separate form called the Common Policy Conditions. These conditions apply to all coverages that are included in the policy. For instance, if a policy includes business auto , general liability , and commercial property coverages, the anti-assignment clause applies to all three coverages.

The clause is entitled Transfer of Your Rights and Duties Under This Policy. It includes the following provision:

Your rights and duties under this policy may not be transferred without our written consent except in the case of death of an individual named insured.

The anti-assignment clause prohibits the  named insured from transferring any of its rights or obligations under the policy to someone else without the insurer's permission. The only exception is if the named insured is an individual (sole proprietor) and he or she dies. An assignment is permitted in this case because a sole proprietorship and the individual owner are one and the same. If the individual dies, the business cannot survive unless it is sold to someone else.

An anti-assignment clause is intended to prevent the insurer from unwittingly assuming risks it never intended to take on. Commercial insurers review business insurance applicants carefully. Before they issue policies, underwriters consider the knowledge and experience of a company's owners and managerial staff. If a business is sold to someone else, the new owners may not be as skilled or attentive as the previous ones. From the insurer's perspective, the new owners are an unknown risk.

Post-Loss Assignments Permitted

The anti-assignment clause doesn't distinguish between assignments made before a loss and those made afterward. Even so, courts in most states have allowed policyholders to assign their rights to another party after a loss has occurred. Pre-loss assignments are still prohibited. Here is an example of a post-loss assignment of insurance benefits.

Victor operates a restaurant called Vital Vittles out of a building he owns. Late one January night two water pipes in the building freeze. The pipes subsequently burst, causing considerable water damage to Victor's building. Victor is forced to close his restaurant until the repairs are completed.

Victor hires a water damage contractor called Rapid Restoration to repair the damage to his building. He tells the contractor that he needs the repairs done quickly as he is anxious to reopen his restaurant. The contractor says that the repairs can be expedited if Victor signs over his rights under the policy to Rapid Restoration. The contractor will then proceed with the repairs and negotiate a claim settlement with Vital Vittles' commercial property insurer. Victor agrees to the assignment and the contractor begins the repair work.

While Vital Vittles' commercial property policy contains an anti-assignment clause, Victor has assigned his rights to Rapid Restoration after a loss has occurred. Thus, in most states, Victor's insurer cannot reject the assignment (assuming post-loss assignments are permitted in Victor's state).

Problems With Assignments of Benefits

In recent years, assignment of benefits (AOB) agreements have been problematic in some states, particularly Florida. Unscrupulous contractors have preyed on unsuspecting homeowners and business owners who have suffered water damage . Some contractors work alone while others operate in cahoots with crooked lawyers. In either event, the contractor convinces the policyholder to assign his or her rights under the policy over to the contractor. The contractor then exaggerates the cost of the repairs and collects the inflated amount from the insurer. The policyholder is left with a large claim on his or her loss history. When the policy expires, the insurer may refuse to renew it.

In the previous example, Victor has assigned his rights under the policy to Rapid Restoration. Suppose that Rapid Restoration completes only half of the repair work on Victor's building. The actual cost is $15,000 but the contractor submits a bill to the insurer for $30,000. Alternatively, the contractor never submits a bill but sues the insurer for $30,000. In either case, the insurer may refuse to pay on the basis that the contractor has committed insurance fraud. Victor cannot intervene because he has signed his rights over to the contractor. If the contractor is unsuccessful in its lawsuit against the insurer, it may demand payment from Victor's company.

Avoiding Problems With AOBs

As a business owner, you can avoid problems associated with AOBs and unscrupulous contractors by taking the following steps:

• Report any loss or accident directly to your insurer (or your agent or broker ). Notify your insurer immediately. Don't allow a contractor to do the notification on your behalf.
• Take photos of the damage.
• Don't allow any contractor to begin work until an insurance adjuster has documented the damage
• Vet contractors thoroughly before hiring them. Make sure they are properly licensed. If your area has suffered a natural disaster, watch out for construction scams.
• Don't sign an AOB unless you have reviewed it carefully. If you don't understand it, ask your agent, insurer, or attorney for assistance.
• If your contractor won't do any work until you've signed an AOB, find another contractor.

AOBs in Health Insurance

Assignment of benefit agreements are common in health insurance. Patients are often asked to agree to such clauses before they receive treatment from a physician, hospital, or another healthcare provider. The assignment of benefits clause transfers a patient's right to collect benefits under his or her health policy to the provider. By signing the document, the patent agrees that payments will be made directly to the provider for the services rendered. The clause states that the patient is ultimately responsible for the charges if the insurer fails to pay.

Once the treatment has been performed, the provider submits the AOB along with a claim to the patient's health insurer. The insurer pays the provider for services rendered to the patient.

Assignment of Claim after a Loss: What Homeowners Should Know

Let’s start with the basics. If you, as a homeowner, sustain property damage or losses because of a covered event (like a fire, for example), you will need your home repaired. You choose a contractor or restoration company to do the work – but the check from the insurance company has not come through yet, and you need them to start right away. So, what can you do?

You can sign an “assignment of claim,” which assigns your rights (as the policyholder) to benefits and proceeds from the loss, to the company or contractors. In the simplest of terms, the assignment of claim allows your contractor to get paid directly from the insurance company.

What is the anti-transfer clause in insurance?

However, many contractors and purchasers of the damaged property have found themselves in a tight spot over the years, because of something called the anti-transfer clause. As explained on the Tennessee Insurance Litigation Blog ,  the anti-transfer clause usually reads something like this: “Your rights and duties under this policy may not be transferred without our written consent except in the case of death of an individual named insured.” Sometimes, the insurance company requires written consent before an assignment of claim can be made.

This clause routinely allows insurers to deny payments to contractors – but it shouldn’t, when an assignment of claim is made post-loss.

What’s the difference between pre-loss vs. post-loss assignments?

The Courts of Tennessee have routinely ruled on behalf of contractors and purchasers who were assigned the claim after the loss occurred. That is because the original assignee – the homeowner – was approved by the insurance company in the first place, and because the damage occurred regardless. There was no additional risk for the insurance company. Therefore, even if the contractor has a long and storied history of rule-breaking (or even criminal activity), the homeowner can assign the claim however he or she chooses; after all, the loss already happened.

Where insurance companies can (and do) have a leg up is for pre-loss assignments. The insurance company underwrote the risk on Bob and Jane Homeowner because it felt confident enough to do so. Bob and Jane cannot assign their policy to another person without the approval of the insurer, even when no loss has occurred.

Even if there is an anti-transfer clause in your policy, the chances are very good that a post-loss assignment cannot be legally denied by your insurer. If it is, seek out an experienced insurance dispute lawyer to help you argue the denial.

One last note for Tennessee policyholders

In some cases, the insurance company may decide that the amount of your loss is worth less than the cost of the renovations for which the contractor is charging. If this happens, you could be on the hook for the remainder of the costs, depending, of course, on the language of the deal with your contractor.

Because of this risk, it’s wise to contact an attorney before making any decisions. Get informed about your rights from the start, and let your lawyer address any potential hiccups along the way. If your insurer lowballs your claim, your attorney can  handle the dispute , to ensure that you are compensated fairly.

At McWherter Scott & Bobbitt, we have spent years fighting against unfair insurance claims policies in Tennessee and Mississippi. Let  Brandon McWherter ,  Jonathan Bobbitt  and  Clint Scott   put their knowledge and experience to work for you. Please call  731-664-1340 or fill out our  contact form . We maintain offices in Nashville, Chattanooga, Memphis, Jackson and Knoxville.

Brandon McWherter has dedicated his practice to assisting insurance policyholders with their claims against insurance companies, including claims for bad faith. He is licensed in Tennessee, Arkansas, and Mississippi. Learn More

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Insurance disputes sometimes arise out of transactions.  Those of you who are involved in transactions, including transactions arising out of insolvencies, might be interested in a cautionary tale from a recent Illinois appellate court case addressing the assignment of insurance policies as part of an asset purchase agreement.  This drafting lesson may help avoid future litigation.

In  The Premcor Refining Group Inc. v. ACE Insurance Company of Illinois , No. 5-18-0210, 2019 Ill. App. Unpub. LEXIS 1539 (Aug. 12, 2019), the purchaser of a refinery from a Chapter 11 debtor sought to obtain the benefits of all the insurance policies issued to the seller and its predecessors by various insurance companies to cover various environmental contamination lawsuits and proceedings.  The refinery was sold via an asset purchase agreement.  The question before the court was whether there was a valid assignment of all the insurance policies from seller to purchaser.

The court concluded that there was no valid assignment of all in the insurance policies in the asset purchase agreement, just the potential assignment of only those policies listed on a particular schedule.  The case was remanded to allow the purchaser to amend its complaint to address only those insurance policies scheduled.

The asset purchase agreement, in the section describing the assets purchased, provided that the purchaser would acquire, among other things, all right, title and interest of the seller in “all proceeds payable under any insurance policy covering the Purchased Assets by reason of any and all occurrences occurring prior to the Closings Date.”  In the section entitled Insurance, the agreement provided that any rights that the seller may have against their insurers with respect to the Purchased Assets shall at closing be assigned to the purchaser.

The court held that neither provision constituted a valid assignment of the rights of the seller under the relevant insurance policies.  The court pointed out that these sections of the asset purchase agreement did not mention liability insurance rights, but evidenced a promise to convey to the purchaser any proceeds from pending claims covering the purchased assets. The court opined that where a purported assignment does not specifically identify an insurance policy, and does not mention liability coverage at all, the subject of the assignment is not described with sufficient particularity to be a valid assignment of all the assignor’s rights under all of its past liability insurance policies.

The court referenced another case where an assignment was found valid by using language that clearly referenced the subject of the assigned liability policies.  In that case,  Illinois Tool Works, Inc. v. Commerce & Industry Insurance Co. , 2011 Ill. App. (1st) 093084 (Dec. 12, 2011), the purchase agreement sufficiently stated what was assigned:

“The benefits, including all rights to defense and indemnity coverage, under any and all policies of liability insurance issued to [Seller] prior to the closing Date . . . with respect to insurance coverage for accidents, occurrences, claims, suits, actions or proceedings arising from the operations, activities, or conduct of the [Seller’s] Business prior to the Closing Date; provided, however, that such benefits shall transfer to [Buyer] to the extent liabilities for such accidents, occurrences, claims, suits, actions, or proceedings are threatened against, transferred to, or otherwise imposed upon [Buyer].”

To avoid litigation over assignment of insurance policies in a corporate transaction requires that if the intent is to assign existing insurance coverage from seller to buyer, the assignment clauses in the purchase agreement must be crystal clear that the policies—not just the proceeds from the polices—are being assigned.  And to make it crystal clear specificity is necessary as to the policies (on a schedule) and what those policies are being assigned to cover should be made clear.

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Assignment of insurance policies and claims | Practical Law

Assignment of insurance policies and claims

Practical law uk practice note w-031-6021  (approx. 19 pages).

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Real Property Sales With Open Insurance Claim: Avoiding Closing Delays, Assignment of Claims, Replacement Costs

Recording of a 90-minute premium CLE video webinar with Q&A

Conducted on Thursday, April 14, 2022

Recorded event now available

This CLE webinar will advise real estate counsel on how to proceed with closing during the pendency of an open insurance claim. The panel will guide counsel on the right to retain insurance benefits under the policy, assign them to the new buyer, and document both options properly. The panel will discuss best practices on proceeding with a claim and how an insured seller who has already collected the actual cash value under the policy can file a depreciation claim.

Description

Selling property during the pendency of an open insurance claim can raise many legal questions. The owner must determine whether it intends to retain the right to receive insurance benefits under the policy or assign them to the new buyer. Documentation of damages and necessary disclosures are part of the process counsel must assist to close the deal.

First and foremost, counsel needs to complete a seller's disclosure form to document unrepaired damage to the property to the buyer. Also, counsel must notify the buyer of open insurance claims, although this may affect the ability to get new insurance and affect the closing.

Once a buyer is ready to proceed, both parties must consider the options. Sellers have the right to assign insurance claims to the new buyer, but counsel will need to provide that documentation. Failure by the parties to convey their intent to transfer the right to receive benefits could render the assignment unenforceable and take away the buyer's standing to obtain the benefits owed in court.

Alternatively, the seller can maintain the insurance claim and sell the property for a reduced amount. Again, counsel must document in the sales documents the amount of price reduction that is allocated to the unrepaired damage. This will help establish a more exact estimate of the repair cost and substantiate the basis for the price reduction. Once again, a seller's disclosure form can show (1) the buyer was on notice of the damages at the time of the sale and (2) that the cost to repair was contemplated in the reduced sale price.

Listen as our expert panel addresses the best practices for closing a purchase with a pending insurance claim with expediency and clarity. The panel will discuss the most common issues and solutions when an available property is attached to a damage claim.

• Seller's disclosures
• Assignment of insurance claims
• Retention of insurance by seller
• Best practices

The panel will address these and other key issues:

• How does a pending insurance claim affect the sale of real estate?
• When assigning an insurance claim as part of a property sale, what are the buyer and seller concerns?
• If a seller maintains the insurance claim in a deal, what documentation is necessary and why?

Mr. Thompson has been practicing law for 31 years. He is a top-rated specialist in the field of policyholder-side insurance recovery, including claim analysis, negotiation, settlement, arbitration, and when needed, litigation. He has won many trials and settled dozens of cases. He has experience representing policyholders in all lines of insurance. Mr. Thompson has worked on dozens of major property and business interruption claims, including some of the largest in history arising from 9/11, hurricanes like Katrina, the California fires, and recently for Covid-19 losses. He also has decades of experience in the hospitality industry and construction matters on behalf of owners or managers, including relating to management agreements, loan agreements, construction defects, mold, pollution, legionella, personal liability, theft, and various commercial disputes (both insurance and other disputes).

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Included very straightforward, practical comments and recommendations, not just a theoretical exercise.

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Arizona School of Real Estate and Business

Assignments of Buyer’s Rights Under Purchase Agreements

June 16, 2014, by michael t. denious.

Often in the course of a real estate transaction, the named buyer under the purchase agreement will seek to assign its rights as buyer to another party, referred to as the assignee. In connection with such assignment, the assignor/buyer transfers any and all rights as buyer under the subject purchase agreement to the assignee, usually in exchange for payment or other consideration given by the assignee to the assignor. As a result, the initial “buyer” is making its profit as of or prior to the closing of the sale, rather than having to take ownership and resell the property to a new buyer. This practice is often referred to as “wholesaling,” and is growing more and more prevalent, including in “short sale” transactions in which the existing mortgage holders agree to accept less than the full amount owed on the mortgage(s) and the seller does not receive any proceeds from the sale (other than those funds paid toward commissions, closing costs and the mortgage(s)).

The general rule under Arizona law is that a buyer’s interest in a real estate purchase agreement is freely assignable, absent restrictions or prohibitions in the underlying purchase agreement to the contrary. Many real estate purchase agreements, especially those drafted in a seller-oriented fashion, will contain such restrictions or prohibitions, such as restrictions against assignments to any other party except for affiliated or related entities, or a flat out prohibition against any assignments without seller’s prior written consent. Many other real estate purchase contract forms, however, including the standard form AAR purchase agreements (including the one used for residential real estate transactions with the “short sale” addendum) contain no such prohibition or restriction.

In the absence of restrictions or prohibitions against assignment in the underlying purchase agreement, and assuming there are no grounds for the seller to object or condition such an assignment, an assignment may be accomplished in as simple as one sentence. The buyer assigns any and all rights, title, and/or interest in the underlying purchase agreement, the escrow, and the underlying real property, to the named assignee. In many cases, however, there may be various reasons, both due to concerns of the buyer/assignor and the new assignee/buyer, that make various additional provisions in an assignment document advisable. What follows is a sample format that addresses various issues that would be of concern to the assignor (original buyer) when assigning the buyer’s rights over to an assignee buyer, including in the context of a “short sale” transaction in which the assignor (original buyer) is a “wholesaler” who seeks to make a profit from the assignment rather than closing on the purchase of the property.

THIS Assignment and Assumption of Buyer’s Rights Under Purchase Contract and Seller’s Consent (“Assignment”) is entered into between ________________, (“Assignor”); and _______________________ (“Assignee”), for Ten Dollars ($10.00) and other valuable consideration, with the consent of the undersigned Seller, and on the following terms and conditions:

1. This Assignment shall be effective as of _________, 2008 (“Assignment Effective Date”).

2. This Assignment pertains to that certain Residential Resale Real Estate Purchase Contract dated as of _____________, and any Addenda or Amendments thereto (hereinafter together the “Purchase Contract”), under which Assignor is Buyer and __________________ are Seller; and under which Buyer has the right to purchase that real property identified as the “Property” therein. The Purchase Contract is being administered pursuant to an escrow (the “Escrow”) established by Assignor and Seller _________________ (the “Escrow”).

3. Assignor hereby nominates Assignee as the substitute “Buyer” under the Purchase Contract. Assignor further assigns to Assignee Assignor’s entire right, title and interest in, to and under the Purchase Contract, the Property and the Escrow.

4. Assignor further assigns to Assignee any of its right, title and interest in or to any and all “Earnest Money” deposited in the Escrow pursuant to the Purchase Contract.

5. Seller acknowledges and agrees that Assignor is not in default under the Purchase Contract, and that the Purchase Contract remains enforceable in accordance with its terms.

6. Assignee hereby accepts the foregoing assignment and agrees to be bound by the terms and conditions of the Purchase Contract and assume the obligations of Buyer under the Purchase Contract.

7. This Assignment shall relieve Assignor of any and all duties, obligations or liabilities under the Purchase Contract.

8. Except as otherwise expressly modified herein, the terms and provisions of the Purchase Contract shall remain in full force and effect.

9. By its signature hereto, Seller consents to the terms of this Assignment, and represents and warrants that to the best of Seller’s knowledge there are no grounds to claim a default of Buyer under the Purchase Contract, and that the Purchase Contract remains enforceable in accordance with its terms as of the Assignment Effective Date.

10. Seller further expressly acknowledges that in connection with this Assignment, Assignor is acting on its own account and not on behalf of Seller, and is receiving separate consideration from Assignee, and therefore is receiving a profit from this transaction. Seller claims no interest in such consideration.

[Signatures of parties to follow]

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Handling Assignment of Benefit (“AOB”) Claims in the Wake of Hurricanes Irma and Harvey

Overview | Blog Posts | First-Party Coverage | Timothy Engelbrecht , T. Nicholas Goanos , L. Andrew Watson | Related | Print | Share

Timothy Engelbrecht

Partner | First-Party Coverage , Extra-Contractual 813-281-1900 [email protected]

T. Nicholas Goanos

Partner | Extra-Contractual , Arson & Fraud , Casualty Defense Litigation , Third-Party Coverage , First-Party Coverage 704-940-9811  [email protected]

L. Andrew Watson

Partner | First-Party Coverage , Extra-Contractual , Casualty Defense Litigation , Arson & Fraud , Third-Party Coverage 704-543-2321 [email protected]

September 12, 2017

Hurricanes Irma and Harvey have damaged large areas of Florida, Texas, and Louisiana, as well as brought heavy rain and wind to Georgia, North Carolina, and South Carolina. As insurers handle thousands of property damage claims in these areas, they will undoubtedly be presented with claims that have been assigned from insureds to damage-repair contractors. These are often referred to as assignments of benefits or “AOB” claims. This article explains briefly what an AOB claim is, how Florida, Texas, Louisiana, Georgia, North Carolina, and South Carolina address AOB claims, and the best practices for handling AOB claims.

WHAT IS AN AOB CLAIM?

The classic example of an AOB claim is the following: an insured suffers property damage and hires a repair contractor to repair that damage. The repair contractor requires the insured to execute a written document, usually entitled “Assignment of Insurance Benefits”, which says something to the effect of “for and in consideration of the contractor’s agreement to protect the property from further damage and/or make repairs, the insured assigns his/her/its insurance benefits to the contractor.” The contractor thereafter makes a claim directly to the insurer using the AOB.

HOW DOES FLORIDA, TEXAS, LOUISIANA, GEORGIA, NORTH CAROLINA, AND SOUTH CAROLINA ADDRESS AOB CLAIMS?

Florida  has allowed AOB claims for over 100 years. Sec. First Ins. Co. v. State, Office of Ins. Regulation , 177 So. 3d 627, 628 (Fla. 1st DCA 2015). Post-loss property damage claims are freely assignable in Florida regardless of whether the insurer consents or not.   Start to Finish Restoration, LLC v. Homeowners Choice Prop. & Cas. Ins. Co. , 192 So. 3d 1275, 1276 (Fla. 2d DCA 2016). An insurance policy that has a “non-assignment” clause only bars the assignment of the entire insurance policy, not an assignment of a post-loss insurance claim. Bioscience West, Inc. v. Gulfstream Prop. & Cas. Ins. Co. , 185 So. 3d 638, 640-41 (Fla. 2d DCA 2016). 

Texas  has adopted the opposite approach to AOBs. The general rule in Texas is that an insured cannot assign an insurance claim if the insurance policy has a non-assignment clause. ARM Props. Mgmt. Group v. RSUI Indem . Co., 642 F.Supp.2d 592, 609-10 (W.D. Tex. 2009) relying on  Tex. Farmers Ins. Co. v. Gerdes , 880 S.W. 2d 215, 218 (Tex. App. 1994). This is true even if the non-assignment clause is general and broadly worded.

Louisiana  takes a hybrid approach to AOBs. Louisiana allows an insurer to place a clause in an insurance policy that prohibits post-loss assignments.   In re Katrina Canal Breaches Litig ., 63 So. 3d 955, 962-63 (La. 2011). However, in order for such a clause to be enforceable, the clause must clearly and unambiguously express that it applies to post-loss assignments.   Id . The general and a broadly worded non-assignment clause that has traditionally appeared in most insurance policies is not sufficient. Id. 

Georgia , much like many of the States above and across the Country, permits AOBs.  See Santiago v. Safeway Ins. Co. , 196 Ga. App. 480, 481, 396 S.E.2d 506, 608 (App. Ct. 1990). Unlike North Carolina and South Carolina, which are discussed below, an assignee in Georgia may pursue his own extra-contractual claim only after first establishing a breach of the insurance policy.  Southern Gen. Ins. Co. v. Holt , 262 Ga. 267, 416 S.E.2d 274, 276-77 (1992). Further, before pursuing an extra-contractual claim, an assignee (or insured) in Georgia must provide the insurer an opportunity to “cure” the alleged “bad faith”. See  Ga. Code Ann. § 33-4-6.

Lastly,  North Carolina  and  South Carolina  also allow AOBs. In upholding the validity of an assignment, courts in these States have ruled not only that assignments of benefits are indeed valid, but also, that they are governed by each State’s general contract law. See e.g., Alaimo Family Chiropractic v. Allstate Ins. Co. , 155 N.C. App. 194, 197, 574 S.E.2d 496, 498 (App. Ct. 2002);  Gray v. State Farm Auto. Ins. Co. , 327 S.C. 646, 491 S.E.2d 272 (App. Ct. 1997). The “rubber” meets the proverbial “road”, though, when an extra-contractual claim is alleged. In North Carolina and South Carolina, a plaintiff may assert an extra-contractual claim, even if the insurer has not breached the insurance policy. See  Tadlock Painting Co. v. Maryland Cas. Co. , 322 S.C. 498, 473 S.E.2d 52 (1996);  Kielbania v. Indian Harbor Ins. Co., 2012 WL 3957926 (M.D.N.C. 2012). However, an assignee is limited in the sense that it may pursue only his own extra-contractual claim, and not the assignors.  Horton v. New S. Ins. Co. , 122 N.C. App. 265, 268, 468 S.E.2d 856, 858 (1996);  Davis v. Liberty Mut. Ins. Co. , 2015 WL 6163243, at *4 (D.S.C. 2015).

WHAT ARE THE BEST PRACTICES FOR HANDLING AN AOB CLAIM?

First, as noted above, an adjuster needs to know if the state law where the AOB claim is being made allows for AOB claims. 

Second, assuming the state allows for AOB claims, the adjuster needs to carefully read what the actual AOB document says. They are not all the same. Some AOBs assign the entire claim. Other AOBs only assign part of the claim. For example, imagine an insured’s property is damaged by water. The insured needs the water extracted and the structure rebuilt. An AOB might assign both the water extraction and the rebuild claim to a single contractor. Or, the insured might execute one AOB to a water extraction contractor and a separate AOB to a different rebuild contractor. Or, an insured might execute an AOB to a water extraction contractor and the insured will retain the remaining rights to make the rebuild claim. If the AOB is unclear what – exactly – is being assigned, it is important for the adjuster to speak with the insured and the contractor to ensure everyone is on the same page.

Third, the adjuster should speak to the insured to gather information necessary to understand and adjust the assigned claim. In Florida, an adjuster likely cannot require a contractor to perform the insurance policy’s post-loss conditions of giving documents, executing a sworn statement in proof of loss, or appearing for an examination under oath. Shaw v. State Farm Fire & Cas. Co.,  37 So. 3d 329, 332-33 (Fla. 5th DCA 2010) disapproved on other grounds in  Nunez v. Geico Gen. Ins. Co. , 117 So. 3d 388 (Fla. 2013). However, the insured is still responsible for fulfilling those conditions even with regard to the assigned claim. Id. The insured’s failure to do so may bar the assigned claim. Id. 

Fourth, assuming payment will be made on the assigned claim, the adjuster should determine who will be listed on the settlement check. If there is a valid AOB, it may be improper to list the insured on the settlement check since the insured’s rights have been assigned to the contractor. Many AOBs will state that only the contractor be listed on the settlement check. However, it is good for an adjuster to confirm with the insured that the insured understands that he/she/it will not be listed on the settlement check. It is also important for the adjuster to correctly determine if a mortgagee needs to be listed on the settlement check. Situations vary depending on the nature of the work that the contractor is doing (damage prevention versus repair) and whether the work has been completed or is still to be done. The adjuster should discuss the situation with the insured, the contractor, and the mortgagee if the adjuster is at all unsure if the mortgagee needs to be on the settlement check.

Fifth, an adjuster should know whether an assigned claim can be resolved using the insurance policy’s appraisal provision. Appraisal can be an inexpensive and expedient way to resolve a claim. In Florida, an insurer usually can require a contractor with an assigned claim to go to appraisal if the insurance policy provides for the mandatory appraisal upon request.  Certified Priority Restoration v. State Farm Florida Ins. Co ., 191 So. 3d 961, 962 (Fla. 4th DCA 2016).

Insurers will continue to be presented with AOB claims in the wake of Hurricanes Irma and Harvey. We have been helping insurers and adjusters navigate the unique issues associated with AOB claims for many years. Please contact us if you have any questions or need assistance.

For any further questions, please contact Timothy Engelbrecht, T. Nicholas Goanos, or L. Andrew Watson.

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• Practical Law

Do you have a draft assignment for assigning an insurance claim to the buyer of a property?

Practical law resource id 9-521-9758  (approx. 3 pages).

• Insurance Litigation

What is pet dental insurance?

Coverage details, choosing the right dental insurance, benefits of pet dental insurance, how to get pet dental insurance, understanding pet dental insurance.

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• Pet insurance with pet dental coverage can be affordable while protecting your pet's health.
• The best pet insurance plans include coverage for periodontal disease.
• Scheduling regular pet dental cleanings can help you avoid lapses in coverage.

Just as brushing and flossing are essential for people, regular dental care is vital for pets, especially cats and dogs. The American Veterinary Medical Association recommends that pets get proper dental care annually (which can be part of their yearly physical).

"Dental health is an integral part of a pet's overall health and should be a key part of their preventive care routine," says Dr. Ari Zabell , a veterinarian with Banfield Pet Hospital.

Dental treatments for periodontal disease, broken teeth, or tumors can be costly. So, more pet owners are looking into pet dental insurance. If you shop carefully, pet dental insurance and other pet insurance protections for all your pet's needs can be open to you.

Some of the best pet insurers , like Embrace Pet Insurance offer comprehensive coverage to care for your pet's pearly whites. Read on to learn more about picking a plan and using it when the time comes.

In most cases, pet dental insurance can't be bought as a standalone policy, according to Dr. Brian Evans, clinical director at the online veterinary clinic, Dutch.

Zabell expands on this point, saying, "Dental insurance for pets is almost always part of a larger pet insurance plan." Pet dental is a natural part of the conversation after you answer the question of whether pet insurance is worth it with a yes.

Definition and scope of coverage

Pet insurance provides reimbursement for unforeseen or emergency care. Since dental pet insurance is typically a feature of your pet insurance policy, you'll receive coverage for dental care related to accidents and illnesses. The following are examples of dental conditions and treatments covered under a pet insurance policy:

• Periodontal disease
• Tooth abscesses
• Cancerous oral growths and tumors
• Fractured tooth 

Your pet insurance coverage is based on a reimbursement model. You pay for services upfront then submit your claim to your insurance company for reimbursement. It might seem like a hassle as we're used to human medical providers taking care of the claims process for us. However, there is a silver lining. You won't need to worry about in-network vs. out-of-network providers for your pet's healthcare.

"Vets do not have a concern about which insurance plan you have as they are not a part of that process," Evans says.

Difference between dental insurance and wellness add-ons

Dental insurance comes with your standard accident and illness policy. Dental insurance is also available through a wellness plan at an additional fee. 

Pet wellness plans cover the cost of preventative dental care, such as routine cleanings or checkups. In contrast, pet insurance policies cover medically necessary treatments and procedures like tooth extractions or root canals. 

Depending on your insurance policy, pet dental insurance will cover emergency procedures and routine care. However, it excludes coverage for pre-existing conditions and certain types of pets. 

Routine dental cleanings

Routine dental cleaning prevents severe dental illnesses in the long run. Wellness plans are typically purchased as add-ons to your regular insurance policy. These plans have their own premiums and coverage limits. Unlike your base policy, they generally don't require deductibles or co-pays. 

Emergency dental procedures

Emergency dental procedures are covered under your base pet insurance policy. Some of these procedures and treatments include: 

• Tooth extractions
• Root canals
• Prescription medicine

Exclusions and limitations

Most pet insurance plans won't cover pre-existing conditions. Since an astounding 80% of dogs have dental disease by the time they're three years old, getting coverage early is critical.

"The best way to ensure your pet's periodontal disease will not be considered pre-existing is to purchase the pet insurance while they still have their puppy teeth," Evans says.

Another exclusion to be aware of is your pet's breed and age. Insurance companies may deny coverage to certain breeds and older pets because they are more prone to health conditions. If your insurer doesn't restrict a high-risk pet, your insurance premiums will likely increase. 

The right dental insurance policy offers coverage that aligns with your pet's needs at a price point comfortable for you. Comparing insurance providers can help you sift through the market and find a policy that meets your criteria.

Factors to consider

When choosing a pet insurance policy, you'll want to consider the following factors: 

• Coverages: Know your pet's health needs and find a policy that covers them. The best pet dental insurance plans should cover periodontal disease, inflammation of the gums, and tissue around the teeth. This is the most common dental condition in cats and dogs.
• Premiums: The average cost of an accident-only pet insurance policy is $10.18 per month for cats and  $16.70 for dogs. The average cost for a comprehensive policy is $32.25 per month for cats and $53.34 for dogs. But it varies widely based on your pet's type, breed, age, and where you live
• Deductible: The amount you need to pay toward your pet's care before the insurance kicks in. Usually, this is deducted from the first reimbursement.
• Reimbursement level: This is the percentage of the vet's invoice your insurer will cover. Usually, reimbursement levels range between 70% and 90% of the procedure costs.
• Coverage maximum: This max is the highest dollar amount your pet insurance will pay for a claim. 

For the most comprehensive pet medical coverage, look for a pet insurance plan with unlimited coverage and a reimbursement rate of 80 to 90%  (you pay 10-20% of your vet bills after the deductible).

"Some pet insurance companies will also say they cover dental cleanings but limit the reimbursement to a small portion of the actual cost," says Evans. "The entire dental cleaning procedure may cost $700, but the pet insurance will only reimburse you $150."

Comparing insurance providers

Shopping around for pet insurance helps you get the lowest price on the coverages you need. To compare insurance policies, get quotes for your pet from a few different insurance companies. Make sure each quote has a similar deductible, coinsurance, and policy limit for the most accurate apples-to-apples comparison. 

Dental care insurance for your pet ensures that your pet's teeth are taken care of without the financial burden. Here are a few of its benefits: 

Preventing costly dental problems

Preventative care is the best way to avoid complicated and costly dental problems as your pet ages. But routine cleaning isn't cheap. According to Spot, an examination, removal of plaque and tartar, and polishing cost between $150 to $350. Meanwhile, the monthly premium of a basic wellness policy can be as little as $9.95 for hundreds of dollars in coverage. 

Enhancing overall pet health

Many pet owners avoid the vet or avoid certain treatments because they can get expensive. Whether you have a sizable emergency fund or wiggle room in your budget, every pet deserves quality healthcare. Pet insurance is a financial tool you can leverage to ensure your furry friend lives a long and healthy life. 

Peace of mind for pet owners

Dental procedures come at a hefty price tag. According to Spot, a pet insurance company, a single tooth extraction will run you about $50 to $200. Extractions for multiple teeth can cost $1,000 or more. More complex procedures like a root canal or surgery for a fractured jaw can amount to thousands of dollars. Pet dental insurance allows you to pay only a fraction of that price. 

You get pet dental insurance the same way you'd get a pet insurance policy or a wellness add-on.

• Step 1: Apply for a policy — After finding a policy that meets your pet's coverage needs and budget, fill out an application with the pet insurance company. The insurer will request personal information such as your location and contact information and your pet's details, such as their name, gender, and breed. This information will be used to assess your premiums. 
• Step 2: Customize your coverages — Most insurance companies let you choose between an accident-only policy and an accident and illness policy. You may also have the option to add a wellness plan. Adjust factors such as deductibles, reimbursement rates, and coverage limits to your specific needs and financial situation. 
• Step 3: Read the fine print — Review your policy's terms and conditions to understand any exclusions, limitations, waiting periods, or other important details that may apply. 
• Step 4: Purchase your policy — At checkout, you'll have the option to pay an annual or monthly premium. Once you've made your decision, proceed by entering your payment details and confirming your payment to secure your coverage. 
• Step 5: Provide requested documentation— Your insurer may ask for additional documentation, such as your pet's medical record or a physical exam to check for any pre-existing conditions. 

How to file a pet dental insurance claim 

After your pet has its teeth taken care of, you must pay the invoice from the veterinarian out-of-pocket. Next, submit the invoice and a pet insurance claim form to your insurer. You'll also need to provide your pet's medical records to prove the treatment wasn't for a pre-existing condition. After that, you'll get a check or direct deposit with the reimbursement. Usually, plans have a time limit for claims submissions.

Although pet dental insurance is relatively new, it can be a powerful tool for your pet's oral health.

"Pet dental health is one of the most important indicators of long-term health and should be a priority for your pet," Evans says. "Choose a pet insurance partner that will assist you in keeping your pet's mouth from being a source of chronic pain and inflammation."

Pet dental insurance covers emergency dental procedures like extractions, root canals, prescription medication, and more. Most wellness policies cover routine dental cleanings and checkups. 

It depends. The standard pet insurance policy covers emergency dental procedures and treatments. If you want coverage for preventive dental care, you'll need to purchase a wellness policy. 

The best way to choose pet dental insurance is to compare policies from multiple companies. Evaluate how each policy stacks up in terms of coverages, coverage limits, deductible amounts, reimbursement rates, and premiums.

Dental insurance helps manage the costs of dental care, which can be expensive, especially for emergency procedures. Additionally, routine dental care, which is covered by a wellness plan, prevents uncomfortable oral diseases like periodontal disease or tooth decay. 

Start by researching insurance providers that offer dental coverage, either as part of their standard policies or as an add-on. Then, get a quote from the insurer through their website or by calling them. If you're happy with the price,  review the terms carefully and finalize your policy. Your insurer may require updated medical records as well as a physical exam to check for pre-existing conditions, which are excluded from coverage.

Editorial Note: Any opinions, analyses, reviews, or recommendations expressed in this article are the author’s alone, and have not been reviewed, approved, or otherwise endorsed by any card issuer. Read our editorial standards .

Please note: While the offers mentioned above are accurate at the time of publication, they're subject to change at any time and may have changed, or may no longer be available.

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Assignment of Insurance Claims in Texas

A colleague of mine recently dealt with an interesting issue regarding the assignment of an insurance claim. Specifically, she looked into how Texas law applies to the assignment of an insurance claim when the insurance policy contains a non-assignment clause. Most states follow the rule that if the policy prohibits assignment, the insured cannot assign the policy but can assign the right to the claim after it occurs. Unsurprisingly, Texas does not follow the majority rule.

The general rule in Texas is that an insured cannot assign an insurance claim if the policy contains a non-assignment clause. See Hoffman v. St. Paul Guardian and Texas Farmers Ins. Co. v. Gerdes . However, Texas law does allow an insured to sell the right to a cause of action if a suit has been filed, even if the underlying contract cannot be assigned. See Pagosa Oil v. Marrs and Smith Partnership .

Texas Property Code Section 12.014(a) states:

A judgment or part of judgment of a court of record or an interest in a cause of action on which suit has been filed may be sold, regardless of whether the judgment or cause of action is assignable in law or equity, if the transfer is in writing.

Therefore, although insurance law does not allow you to assign your claim if your policy contains a non-assignment clause, Texas property law allows you to reach the same result by selling the cause of action in writing. Although I don’t know the attorney who discovered this workaround, if s/he’s reading this, we all thank you.

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