The abuse of Assignments of Benefits (“AOB”) in first-party property insurance claims has been well documented. The Consumer Protection Coalition, formed to raise awareness of AOB abuse, reports Florida AOB lawsuits have increased 90,000 percent since 2000. Michael Carlson, executive director of the Personal Insurance Federation of Florida (PIFF), said “highly litigious” groups of trial firms as well as certain types of contractors have been taking advantage of the AOB provision in homeowners insurance policies. In many cases, contractors are inflating the cost of repair work and suing insurance companies if a claim is denied or not paid in full.
Recognizing the threat that AOB abuse poses to the insureds of Louisiana, The Monson Law Firm attorney Matthew Monson set out to end this problem. His research revealed that the easiest way to protect policyholders from predatory AOB practices and keep control of the claim in the hands of the insured is by improving the language of property policies. The Louisiana Supreme Court addressed this issue in In re Katrina Canal Breaches Litig., holding “that parties may contract to prohibit post-loss assignments, [but also held that] the contract language must clearly and unambiguously express that the non-assignment clause applies to post-loss assignments.” 2010-1823 (La. 5/10/11), 63 So. 3d 955, 963. More specifically, the Court held as follows:
“Post-loss assignment of claims arising under the policy is not equivalent to the assignment of the policy itself, or an interest in the policy. Given the categorical difference, we find it incumbent on insurers to include clear and unambiguous language in their policies. We do not find it necessary to formulate a test consisting of specific terms or words, however the insurer must include language making it clear and explicit that post-loss assignments are prohibited under the policy.” (emphasis added). This case can be accessed here.
According to this language, we recognized that the Louisiana Supreme Court provided a clear roadmap to addressing the issue of abuse of AOB – by including specific policy language that restricts post-loss Assignments of Benefits. Thus, Matthew Monson drafted two possible clauses to add to the Assignment section of a property policy for presentation to the Louisiana Department of Insurance to protect Louisiana insureds. These clauses are as follows:
Post-loss assignment of rights, benefits or claims arising under this policy are prohibited.
Post-loss assignment of rights, benefits or claims arising under this policy will not be valid unless we give our written consent.
Lighthouse Property Insurance Corporation was the first insurer nationwide to receive approval to include this language in its policies. Since then, multiple insurers have also incorporated this language into their policies. The Monson Law Firm would like to thank Louisiana Insurance Commissioner Jim Donelon and his team for their foresight in tackling this growing problem that threatens insureds in all states.
The Monson Law Firm also calls upon every state insurance regulatory body to take similar action to protect their policyholders.