Dear Mr. Cohen,
I’m halfway through a medium sized residential fire restoration job and the adjuster tells me I don’t have a “valid assignment of benefits” in my contract with the home owner! Say what?
I didn’t want to appear clueless to the adjuster (even though I am) so I just mumbled something about how that was an old version of our authorization and I’d have the insured sign a new contract right away. Can you help me?
Clueless in Tulsa
An assignment of benefits is simply a legal document entitling you, the restoration company, to “stand in the shoes” of the homeowner so you can bill the insurance company directly for the services your company provided.
Now if you’re going to take the time to have the homeowner sign a new assignment of benefits then be sure you have all the information you need in the assignment and that you understand the contract you’re entering into with the homeowner/policy holder.
Generally, the way an assignment of benefits works is homeowners “assign” the rights and benefits under their insurance policy for a specific claim to the restoration company. Homeowners do this in exchange for not having to pay to repair their property upfront or at the time work is being done. The assignment of benefits allows you to be paid directly from the insurance company as if you were the homeowner. The rules and requirements vary in different jurisdictions so be sure to consult an attorney licensed in your state.
Once the insurance company receives the assignment of benefits signed by homeowner-insured the insurance company has to deal with you instead of the homeowner. Checks from the insurance company for insurance proceeds for payment of your services must be issued with your company name on it.
In your case, the adjuster said your contract didn’t have a valid assignment of benefits. Sometimes there is confusion between an Assignment of Benefits and a Direction to Pay. A Direction to Pay is a form that essentially instructs the insurance company on how to issue payment of insurance proceeds. On the other hand, with an assignment of benefits, there’s a transfer of rights which gives legal standing to bring suit if the insurance company fails to issue you the proper payment.
The assignment of benefits should be a separate document or a separate clause in your contract with the homeowner. The assignment should include the name of the insurance company, and some information about the claim, such as the claim number, policy number and the date of loss. It must be signed by the policy holder or an authorized representative of the policy holder. The assignment can be signed anytime within the Statute of Limitations. Each state has its own timeframe, so check with an attorney in your state for state-specific statutes and case law. (For example, Florida has a five-year Statute of Limitations.)
A valid assignment allows you, the restoration company, to receive the right of payment under the insurance policy for the claim assigned in the same way the homeowner would for payment for services you performed on the property.
Finally, consider some additional supporting documents to help you with the claims collection process. You’ll want to send a demand letter to the insurance company wherein you provide your service contract with the insured, your invoice, signed assignment of insurance benefits, certificate of completion and satisfaction and, if you choose, a direction to pay. You might also consider a form where the insured gives consent for you to discuss the claim with the mortgage company, if there is a mortgage company named in the policy.
Each insurance policy has different limitations so payment from insurance proceeds for your services is not guaranteed even if you performed them and restored the property to pre-loss condition. Carefully documenting your file and maintaining proof of loss, such as before and after photographs, daily work and communication logs with the insurance company will put you in the best position to be paid as efficiently and quickly as possible.
After graduating from Stetson, Harvey was employed by the State Attorney’s Office. Mr. Cohen is licensed to practice in Federal and State court. Mr. Cohen began as a solo practitioner and is now the managing partner of over a dozen attorneys and co-council staff. Cohen Battisti Attorneys at Law are great supporters of the Leukemia Lymphoma Society.
Mr. Cohen frequently gives informative seminars to restoration professionals throughout various locations in Florida and the nation. These seminars include: Contractor’s legal rights, Assignment of Insurance Benefits, the Attorney Fee Shifting Statute, Contract Drafting and more.
His firm has handled thousands of insurance claims. Cohen Battisti has represented the restoration industry and has recovered hundreds of thousands of dollars for their clients and the insurance industry has paid for their attorneys fees. To contact Cohen Battisti attorneys please call (407) 478-4878 or visit our website at www.CohenBattisti.com