assignment of benefits colorado

C.R.S. Section 10-4-634 Assignment of payment for covered benefits

Source: Section 10-4-634 — Assignment of payment for covered benefits , https://leg.­colorado.­gov/sites/default/files/images/olls/crs2023-title-10.­pdf (accessed Oct. 20, 2023).

Current through Fall 2024

§ 10-4-634’s source at colorado​.gov

Blank Outline Levels

The legislature occasionally skips outline levels. For example:

In this example, (3) , (4) , and (4)(a) are all outline levels, but (4) was omitted by its authors. It's only implied. This presents an interesting challenge when laying out the text. We've decided to display a blank section with this note, in order to aide readability.

Do you have an opinion about this solution? Drop us a line.

Assignment of Benefits: What It Is, and How It Can Affect your Property Insurance Claim

Table of Contents

What is an Assignment of Benefits?

In the context of insured property claims, an assignment of benefits (AOB) is an agreement between you and a contractor in which you give the contractor your right to insurance payments for a specific scope of work .  In exchange, the contractor agrees that it will not seek payment from you for that scope of work, except for the amount of any applicable deductible.  In other words, you give part of your insurance claim to your contractor, and your contractor agrees not to collect from you for part of its work.

The most important thing to know about an assignment of benefits is that it puts your contractor in control your claim , at least for their scope of work.  Losing that control can significantly affect the direction and outcome of your claim, so you should fully understand the implications of an AOB (sometimes called an assignment of claims or AOC) before signing one.

How Does an Assignment of Benefits Work in Practice? 

Let’s say you’re an insured homeowner, and Hurricane Ian significantly damaged your roof.  Let’s also assume your homeowner’s policy covers that damage.  A roofer, after inspecting your roof and reviewing your insurance policy, might conclude that your insurer is probably going to pay for a roof replacement under your insurance policy.  The only problem is that it’s early in the recovery process, and your insurer hasn’t yet stated whether it will pay for the roof replacement proposed by your contractor. So if you want your roof replaced now, you would ordinarily agree to pay your roofer for the replacement, and wait in hopes that your insurer reimburses you for the work.  This means that if your insurance company refuses to pay or drags out payment, you’re on the hook to your roofer for the cost of the replacement.

As an alternative to agreeing to pay your roofer for the full cost of the work, you could sign an assignment of benefits for the roof replacement.  In this scenario, your roofer owns the part of your insurance claim that pertains to the roof replacement.  You might have to pay your roofer for the amount of your deductible, but you probably don’t have to pay them for the rest of the cost of the work.  And if your insurance company refuses to pay or drags out payment for the roof replacement, it’s your roofer, and not you, who would be on the hook for that shortfall.

So should you sign an AOB?  Not necessarily.  Read below to understand the pros and cons of an assignment of benefits.

Are There any Downsides to Signing an Assignment of Benefits?

Yes.  

You lose control of your claim . This is the most important factor to understand when considering whether to sign an AOB.  An AOB is a formal assignment of your legal rights to payment under your insurance contract.  Unless you’re able to cancel the AOB, your contractor will have full control over your claim as it relates to their work. 

To explain why that control could matter, let’s go back to the roof replacement example.  When you signed the AOB, the scope of work you agreed on was to replace the roof.  But you’re not a roofing expert, so you don’t know whether the costs charged or the materials used by the roofer in its statement of work are industry appropriate or not.  In most cases, they probably are appropriate, and there’s no problem.  But if they’re not – if, for instance, the roofer’s prices are unreasonably high – then the insurer may not approve coverage for the replacement.  At that point, the roofer could lower its prices so the insurer approves the work, but it doesn’t have to, because it controls the claim .  Instead it could hold up work and threaten to sue your insurer unless it approves the work at the originally proposed price.  Now the entire project is insnared in litigation, leaving you in a tough spot with your insurer for your other claims and, most importantly, with an old leaky roof.

Misunderstanding the Scope of Work.   Another issue that can arise is that you don’t understand the scope of the assignment of benefits.  Contractor estimates and scopes of work are often highly technical documents that can be long on detail but short on clarity.  Contractors are experts at reading and writing them.  You are not.  That difference matters because the extent of your assignment of benefits is based on that technical, difficult-to-understand scope of work.  This can lead to situations where your understanding of what you’re authorizing the contractor to do is very different from what you’ve actually authorized in the AOB agreement.

In many cases, it’s not necessary .   Many contractors will work with you and your insurer to provide a detailed estimate of their work, and will not begin that work until your insurer has approved coverage for it.  This arrangement significantly reduces the risk of you being on the hook for uninsured repairs, without creating any of the potential problems that can occur when you give away your rights to your claim.

Do I have to sign an Assignment of Benefits?

No.  You are absolutely not required to sign an AOB if you do not want to. 

Are There any Benefits to Signing an Assignment of Benefits?

Potentially, but only if you’ve fully vetted your contractor and your claim involves complicated and technical construction issues that you don’t want to deal with. 

First, you must do your homework to fully vet your contractor!  Do not just take their word for it or be duped by slick ads.  Read reviews, understand their certificate of insurance, know where they’re located, and, if possible, ask for and talk to references.  If you’ve determined that the contractor is highly competent at the work they do, is fully insured, and has a good reputation with customers, then that reduces the risk that they’ll abuse their rights to your claim.

Second, if your claim involves complicated reconstruction issues, a reputable contractor may be well equipped to handle the claim and move it forward.  If you don’t want to deal with the hassle of handling a complicated claim like this, and you know you have a good contractor, one way to get rid of that hassle is an AOB.

Another way to get rid of the hassle is to try Claimly, the all-in-one claims handling tool that get you results but keeps you in control of your claim.  

Can my insurance policy restrict the use of AOBs?

Yes, it’s possible that your Florida insurance policy restricts the use of AOBs, but only if all of the following criteria are met:

• When you selected your coverage, your insurer offered you a different policy with the same coverage, only it did not restrict the right to sign an AOB.
• Your insurer made the restricted policy available at a lower cost than the unrestricted policy.
• If the policy completely prohibits AOBs, then it was made available at a lower cost than any policy partially prohibiting AOBs.
• The policy includes on its face the following notice in 18-point uppercase and boldfaced type:

THIS POLICY DOES NOT ALLOW THE UNRESTRICTED ASSIGNMENT OF POST-LOSS INSURANCE BENEFITS. BY SELECTING THIS POLICY, YOU WAIVE YOUR RIGHT TO FREELY ASSIGN OR TRANSFER THE POST-LOSS PROPERTY INSURANCE BENEFITS AVAILABLE UNDER THIS POLICY TO A THIRD PARTY OR TO OTHERWISE FREELY ENTER INTO AN ASSIGNMENT AGREEMENT AS THE TERM IS DEFINED IN SECTION 627.7153 OF THE FLORIDA STATUTES.

627.7153. 

Pro Tip : If you have an electronic copy of your complete insurance policy (not just the declaration page), then search for “policy does not allow the unrestricted assignment” or another phrase from the required language above to see if your policy restricts an AOB.  If your policy doesn’t contain this required language, it probably doesn’t restrict AOBs.

Do I have any rights or protections concerning Assignments of Benefits?

Yes, you do.  Florida recently enacted laws that protect consumers when dealing with an AOB.

Protections in the AOB Contract

To be enforceable, a Assignments of Benefits must meet all of the following requirements:

• Be in writing and executed by and between you and the contractor.
• Contain a provision that allows you to cancel the assignment agreement without a penalty or fee by submitting a written notice of cancellation signed by the you to the assignee:
• at least 30 days after the date work on the property is scheduled to commence if the assignee has not substantially performed, or
• at least 30 days after the execution of the agreement if the agreement does not contain a commencement date and the assignee has not begun substantial work on the property.
• Contain a provision requiring the assignee to provide a copy of the executed assignment agreement to the insurer within 3 business days after the date on which the assignment agreement is executed or the date on which work begins, whichever is earlier.
• Contain a written, itemized, per-unit cost estimate of the services to be performed by the assignee .
• Relate only to work to be performed by the assignee for services to protect, repair, restore, or replace a dwelling or structure or to mitigate against further damage to such property.
• Contain the following notice in 18-point uppercase and boldfaced type:

YOU ARE AGREEING TO GIVE UP CERTAIN RIGHTS YOU HAVE UNDER YOUR INSURANCE POLICY TO A THIRD PARTY, WHICH MAY RESULT IN LITIGATION AGAINST YOUR INSURER. PLEASE READ AND UNDERSTAND THIS DOCUMENT BEFORE SIGNING IT. YOU HAVE THE RIGHT TO CANCEL THIS AGREEMENT WITHOUT PENALTY WITHIN 14 DAYS AFTER THE DATE THIS AGREEMENT IS EXECUTED, AT LEAST 30 DAYS AFTER THE DATE WORK ON THE PROPERTY IS SCHEDULED TO COMMENCE IF THE ASSIGNEE HAS NOT SUBSTANTIALLY PERFORMED, OR AT LEAST 30 DAYS AFTER THE EXECUTION OF THE AGREEMENT IF THE AGREEMENT DOES NOT CONTAIN A COMMENCEMENT DATE AND THE ASSIGNEE HAS NOT BEGUN SUBSTANTIAL WORK ON THE PROPERTY. HOWEVER, YOU ARE OBLIGATED FOR PAYMENT OF ANY CONTRACTED WORK PERFORMED BEFORE THE AGREEMENT IS RESCINDED. THIS AGREEMENT DOES NOT CHANGE YOUR OBLIGATION TO PERFORM THE DUTIES REQUIRED UNDER YOUR PROPERTY INSURANCE POLICY.

• Contain a provision requiring the assignee to indemnify and hold harmless the assignor from all liabilities, damages, losses, and costs, including, but not limited to, attorney fees.

Contractor Duties

Under Florida law, a contractor (or anyone else) receiving rights to a claim under an AOB:

• Must provide you with accurate and up-to-date revised estimates of the scope of work to be performed as supplemental or additional repairs are required.
• Must perform the work in accordance with accepted industry standards.
• May not seek payment from you exceeding the applicable deductible under the policy unless asked the contractor to perform additional work at the your own expense.
• Must, as a condition precedent to filing suit under the policy, and, if required by the insurer, submit to examinations under oath and recorded statements conducted by the insurer or the insurer’s representative that are reasonably necessary, based on the scope of the work and the complexity of the claim, which examinations and recorded statements must be limited to matters related to the services provided, the cost of the services, and the assignment agreement.
• Must, as a condition precedent to filing suit under the policy, and, if required by the insurer, participate in appraisal or other alternative dispute resolution methods in accordance with the terms of the policy.
• If the contractor is making emergency repairs, the assignment of benefits cannot exceed the greater of $3,000 or 1% of your Coverage A limit.

Recommended Posts

What is a public adjuster an overview of this important profession, five essential tips for navigating a renters insurance claim, actual cash value vs. replacement cost in property insurance claims: a comprehensive guide.

Brelly’s tools and resources are your secret weapon to getting your insurance claim filed right, moving fast, and paid fully .

• Construction Accidents

Practice Areas

• Retirement Planning

Assignment of Benefits: What You Need to Know

• August 17, 2022
• Steven Schwartzapfel

Insurance can be useful, but dealing with the back-and-forth between insurance companies and contractors, medical specialists, and others can be a time-consuming and ultimately unpleasant experience. You want your medical bills to be paid without having to act as a middleman between your healthcare provider and your insurer.

However, there’s a way you can streamline this process. With an assignment of benefits, you can designate your healthcare provider or any other insurance payout recipient as the go-to party for insurance claims. While this can be convenient, there are certain risks to keep in mind as well.

Below, we’ll explore what an assignment of insurance benefits is (as well as other forms of remediation), how it works, and when you should employ it. For more information, or to learn whether you may have a claim against an insurer, contact Schwartzapfel Lawyers now at 1-516-342-2200 .

What Is an Assignment of Benefits?

An assignment of benefits (AOB) is a legal process through which an insured individual or party signs paperwork that designates another party like a contractor, company, or healthcare provider as their insurance claimant .

Suppose you’re injured in a car accident and need to file a claim with your health insurance company for medical bills and related costs. However, you also need plenty of time to recover. The thought of constantly negotiating between your insurance company, your healthcare provider, and anyone else seems draining and unwelcome.

With an assignment of benefits, you can designate your healthcare provider as your insurance claimant. Then, your healthcare provider can request insurance payouts from your healthcare insurance provider directly.

Through this system, the health insurance provider directly pays your physician or hospital rather than paying you. This means you don’t have to pay your healthcare provider. It’s a streamlined, straightforward way to make sure insurance money gets where it needs to go. It also saves you time and prevents you from having to think about insurance payments unless absolutely necessary.

What Does an Assignment of Benefits Mean?

An AOB means that you designate another party as your insurance claimant. In the above example, that’s your healthcare provider, which could be a physician, hospital, or other organization.

With the assignment of insurance coverage, that healthcare provider can then make a claim for insurance payments directly to your insurance company. The insurance company then pays your healthcare provider directly, and you’re removed as the middleman.

As a bonus, this system sometimes cuts down on your overall costs by eliminating certain service fees. Since there’s only one transaction — the transaction between your healthcare provider and your health insurer — there’s only one set of service fees to contend with. You don’t have to deal with two sets of service fees from first receiving money from your insurance provider, then sending that money to your healthcare provider.

Ultimately, the point of an assignment of benefits is to make things easier for you, your insurer, and anyone else involved in the process.

What Types of Insurance Qualify for an Assignment of Benefits?

Most types of commonly held insurance can work with an assignment of benefits. These insurance types include car insurance, healthcare insurance, homeowners insurance, property insurance, and more.

Note that not all insurance companies allow you to use an assignment of benefits. For an assignment of benefits to work, the potential insurance claimant and the insurance company in question must each sign the paperwork and agree to the arrangement. This prevents fraud (to some extent) and ensures that every party goes into the arrangement with clear expectations.

If your insurance company does not accept assignments of benefits, you’ll have to take care of insurance payments the traditional way. There are many reasons why an insurance company may not accept an assignment of benefits.

To speak with a Schwartzapfel Lawyers expert about this directly, call 1-516-342-2200 for a free consultation today. It will be our privilege to assist you with all your legal questions, needs, and recovery efforts.

Who Uses Assignments of Benefits?

Many providers, services, and contractors use assignments of benefits. It’s often in their interests to accept an assignment of benefits since they can get paid for their work more quickly and make critical decisions without having to consult the insurance policyholder first.

Imagine a circumstance in which a homeowner wants a contractor to add a new room to their property. The contractor knows that the scale of the project could increase or shrink depending on the specifics of the job, the weather, and other factors.

If the homeowner uses an assignment of benefits to give the contractor rights to make insurance claims for the project, that contractor can then:

• Bill the insurer directly for their work. This is beneficial since it ensures that the contractor’s employees get paid promptly and they can purchase the supplies they need.
• Make important decisions to ensure that the project completes on time. For example, a contract can authorize another insurance claim for extra supplies without consulting with the homeowner beforehand, saving time and potentially money in the process.

Practically any company or organization that receives payments from insurance companies may choose to take advantage of an assignment of benefits with you. Example companies and providers include:

• Ambulance services
• Drug and biological companies
• Lab diagnostic services
• Hospitals and medical centers like clinics
• Certified medical professionals such as nurse anesthetists, nurse midwives, clinical psychologists, and others
• Ambulatory surgical center services
• Permanent repair and improvement contractors like carpenters, plumbers, roofers, restoration companies, and others
• Auto repair shops and mechanic organizations

Advantages of Using an Assignment of Benefits

An assignment of benefits can be an advantageous contract to employ, especially if you believe that you’ll need to pay a contractor, healthcare provider, and/or other organization via insurance payouts regularly for the near future.

These benefits include but are not limited to:

• Save time for yourself. Again, imagine a circumstance in which you are hospitalized and have to pay your healthcare provider through your health insurance payouts. If you use an assignment of benefits, you don’t have to make the payments personally or oversee the insurance payouts. Instead, you can focus on resting and recovering.
• Possibly save yourself money in the long run. As noted above, an assignment of benefits can help you circumvent some service fees by limiting the number of transactions or money transfers required to ensure everyone is paid on time.
• Increased peace of mind. Many people don’t like having to constantly think about insurance payouts, contacting their insurance company, or negotiating between insurers and contractors/providers. With an assignment of benefits, you can let your insurance company and a contractor or provider work things out between them, though this can lead to applications later down the road.

Because of these benefits, many recovering individuals, car accident victims, homeowners, and others utilize AOB agreements from time to time.

Risks of Using an Assignment of Benefits

Worth mentioning, too, is that an assignment of benefits does carry certain risks you should be aware of before presenting this contract to your insurance company or a contractor or provider. Remember, an assignment of benefits is a legally binding contract unless it is otherwise dissolved (which is technically possible).

The risks of using an assignment of benefits include:

• You give billing control to your healthcare provider, contractor, or another party. This allows them to bill your insurance company for charges that you might not find necessary. For example, a home improvement contractor might bill a homeowner’s insurance company for an unnecessary material or improvement. The homeowner only finds out after the fact and after all the money has been paid, resulting in a higher premium for their insurance policy or more fees than they expected.
• You allow a contractor or service provider to sue your insurance company if the insurer does not want to pay for a certain service or bill. This can happen if the insurance company and contractor or service provider disagree on one or another billable item. Then, you may be dragged into litigation or arbitration you did not agree to in the first place.
• You may lose track of what your insurance company pays for various services . As such, you could be surprised if your health insurance or other insurance premiums and deductibles increase suddenly.

Given these disadvantages, it’s still wise to keep track of insurance payments even if you choose to use an assignment of benefits. For example, you might request that your insurance company keep you up to date on all billable items a contractor or service provider charges for the duration of your treatment or project.

For more on this and related topic, call Schwartzapfel Lawyers now at 1-516-342-2200 .

How To Make Sure an Assignment of Benefits Is Safe

Even though AOBs do carry potential disadvantages, there are ways to make sure that your chosen contract is safe and legally airtight. First, it’s generally a wise idea to contact knowledgeable legal representatives so they can look over your paperwork and ensure that any given assignment of benefits doesn’t contain any loopholes that could be exploited by a service provider or contractor.

The right lawyer can also make sure that an assignment of benefits is legally binding for your insurance provider. To make sure an assignment of benefits is safe, you should perform the following steps:

• Always check for reviews and references before hiring a contractor or service provider, especially if you plan to use an AOB ahead of time. For example, you should stay away if a contractor has a reputation for abusing insurance claims.
• Always get several estimates for work, repairs, or bills. Then, you can compare the estimated bills and see whether one contractor or service provider is likely to be honest about their charges.
• Get all estimates, payment schedules, and project schedules in writing so you can refer back to them later on.
• Don’t let a service provider or contractor pressure you into hiring them for any reason . If they seem overly excited about getting started, they could be trying to rush things along or get you to sign an AOB so that they can start issuing charges to your insurance company.
• Read your assignment of benefits contract fully. Make sure that there aren’t any legal loopholes that a contractor or service provider can take advantage of. An experienced lawyer can help you draft and sign a beneficial AOB contract.

Can You Sue a Party for Abusing an Assignment of Benefits?

Sometimes. If you believe your assignment of benefits is being abused by a contractor or service provider, you may be able to sue them for breaching your contract or even AOB fraud. However, successfully suing for insurance fraud of any kind is often difficult.

Also, you should remember that a contractor or service provider can sue your insurance company if the insurance carrier decides not to pay them. For example, if your insurer decides that a service provider is engaging in billing scams and no longer wishes to make payouts, this could put you in legal hot water.

If you’re not sure whether you have grounds for a lawsuit, contact Schwartzapfel Lawyers today at 1-516-342-2200 . At no charge, we’ll examine the details of your case and provide you with a consultation. Don’t wait. Call now!

Assignment of Benefits FAQs

Which states allow assignments of benefits.

Every state allows you to offer an assignment of benefits to a contractor and/or insurance company. That means, whether you live in New York, Florida, Arizona, California, or some other state, you can rest assured that AOBs are viable tools to streamline the insurance payout process.

Can You Revoke an Assignment of Benefits?

Yes. There may come a time when you need to revoke an assignment of benefits. This may be because you no longer want the provider or contractor to have control over your insurance claims, or because you want to switch providers/contractors.

To revoke an assignment of benefits agreement, you must notify the assignee (i.e., the new insurance claimant). A legally solid assignment of benefits contract should also include terms and rules for this decision. Once more, it’s usually a wise idea to have an experienced lawyer look over an assignment of benefits contract to make sure you don’t miss these by accident.

Contact Schwartzapfel Lawyers Today

An assignment of benefits is an invaluable tool when you need to streamline the insurance claims process. For example, you can designate your healthcare provider as your primary claimant with an assignment of benefits, allowing them to charge your insurance company directly for healthcare costs.

However, there are also risks associated with an assignment of benefits. If you believe a contractor or healthcare provider is charging your insurance company unfairly, you may need legal representatives. Schwartzapfel Lawyers can help.

As knowledgeable New York attorneys who are well-versed in New York insurance law, we’re ready to assist with any and all litigation needs. For a free case evaluation and consultation, contact Schwartzapfel Lawyers today at 1-516-342-2200 !

Schwartzapfel Lawyers, P.C. | Fighting For You™™

What Is an Insurance Claim? | Experian

What is assignment of benefits, and how does it impact insurers? | Insurance Business Mag

Florida Insurance Ruling Sets Precedent for Assignment of Benefits | Law.com

Related Posts

Can you plead the fifth in a civil case.

Most of us associate the Fifth Amendment with police interrogations and criminal courtrooms on TV. But what if you find

Do Civil Cases Have A Jury?

If you or a loved one has been injured and are seeking financial compensation, you might be wondering what to

De Jure vs. De Facto: The Differences Explained

Two important concepts often get tangled in the legal system: de jure vs. de facto. These Latin terms may sound

We'll Fight For You

Schwartzapfel® lawyers has a 99% client satisfaction rate, quick links.

• News & Events
• Verdicts & Settlements
• Video Gallery
• Wrongful Death
• Vehicle Accidents
• Slip & Fall
• Medical Malpractice
• Workers' Compensation
• Personal Injuries
• Product Liability
• Garden City

Contractors: Reduce Payment Delays

Prompt payment is crucial for skilled tradesmen, like roofers. To expedite the process, consider adding a clause to your contracts that allows you to bill the homeowner’s insurance carrier directly. This bypasses the customer’s inexperience with submitting claims and ensures the insurance check goes straight to you, rather than being spent elsewhere by the homeowner. Implementing this simple change can significantly reduce payment delays.

It’s called an ‘Assignment of Benefits’ clause.

What is an Assignment of Benefits Clause? 

An assignment of benefits (AOB) legally transfers some or all of a client’s insurance benefits to the contractor. For example, if you repair a client’s storm-damaged roof, the insurer sends the benefit check(s) straight to you.

The AOB clause — agreed to by you and the homeowner — allows you to deal directly with the insurer. You become the assignee for the insurance benefits. The homeowner client has no more part to play, other than getting their roof repaired.

Benefits of an AOB Clause 

The biggest benefit to you , the contractor, is that this process cuts out the middleman, aka the homeowner. It prevents the customer from backing out or delaying payment after you’ve poured your time and resources into the project.

Another benefit? Many homeowners have enough stress to deal with after suffering a substantial loss. These clients will be happy to avoid the push-and-pull process of dealing with their insurance carrier.

Two Types of AOBs 

As the contractor, your potential benefits depend on which type of AOB you and the homeowner agree to use.

Assignment of Direct Payment 

In this narrow arrangement, the contractor only has the right to collect payment directly from the insurer. You bill the insurer, and instead of sending the client the check, they pay you.

You are entitled only to payment for your services in the repair or restoration of the client’s property.

Assignment of Full Rights 

This type of AOB gives you, the contractor, all the rights and responsibilities of the insured homeowner. Most crucially, it includes the right to sue for any claims the customer/insured might have against the carrier including for breach of contract and bad faith if the insurer unjustly denies or delays the claim. Successful bad faith lawsuits award double the amount of the original claim.

Both AOB types offer one clear benefit: Instead of waiting for cash up front, you can start on the project, then bill the insurer directly.

Requirements of a Colorado AOB 

In Colorado, an assignment of benefits (AOB) clause or document must include the following elements:

• Bolded Disclosure: A prominent, bolded statement informing the customer of the insurance rights they are relinquishing by signing the AOB.
• An Itemized Breakdown: A detailed list of work to be performed, including the scope of services and materials required, broken down per unit.
• A Written Estimate: A comprehensive written estimate of all services to be performed, providing transparency and clarity for the customer.
• Cancellation provisions: Three distinct cancellation options for the customer: (a) within 14 days of signing the AOB, with written notice to the contractor, (b) 30 or more days after signing, if the AOB has no start date and work has not commenced, and (c) if the contractor/roofer has not “substantially performed” at least 30 days after the agreed-upon start date.
• Communication Restrictions: Language preventing the policyholder from directly communicating with their insurer about the claim once the AOB is signed.
• Contractor Rights: A clause granting the contractor the right to negotiate, endorse payments, or take legal action against the insurer on the policyholder’s behalf.

These essential components ensure that contractor AOB agreements comply with Colorado’s legal requirements. This protects the interests of both the contractors and their customers.

Potential Risks of AOBs 

Assignment of Benefits clauses have clear benefits for contractors and homeowners alike. However, there are risks — especially when contractors forget to consult experienced contract attorneys beforehand.  

• Less Sympathy in Litigation: Be cautious when securing an AOB with “full rights” of the insured. In a lawsuit, a jury may be less sympathetic to your business than they might be to a homeowner. Moreover, the insurance company is likely to try to argue that your “greed,” rather than their alleged “bad faith,” is the real problem.
• Undisclosed Policy Breech: The insurer may withhold payment due to an undisclosed policy breach by the homeowner. If you’ve waived your right to collect from the homeowner, this can result in a total loss. Make sure the homeowner is in good standing with their insurance carrier before entering into an AOB arrangement.
• Longer collection periods: Relying on insurance companies for payment instead of homeowners can increase the average time it takes to collect on open accounts, negatively impacting cash flow.
• Slow Insurance Companies: Accepting AOBs means relying on insurers for payment. This can lengthen the time it takes to collect on some accounts. As you know, longer collection periods negatively impact cash flow.

Ultimately, if AOBs lead to longer payment cycles and increased operational expenses, contractors should carefully consider the potential drawbacks before accepting them.

Need Help Getting Paid What’s Owed to You?

There are many ways you can protect your business. The most important way is drafting the right contract for the job. Our experienced contract law attorneys can help. Let one of our lawyers discuss the specifics of your situation. We’ll help you find the best way forward for your business. Call 303-688-0944 for your case assessment .

More Than Just Lawyers. Lawyers for Your Life.

Learn more about our law firm’s philosophy and values.

• Practice Areas

• 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 – Assignment of Benefits: Ultimate Guide for Contractors & Policyholders

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.

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

Lien waiver vs. lien release: what’s the difference.

Lien waivers and lien releases are completely different documents (even though they are often confused by the construction industry). Read...

What Is Underbilling? | Construction Industry Accounting

Underbilling occurs when a contractor does not bill for all the labor and materials delivered in a billing cycle. It...

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...

How to Protect Your Payments When Dealing with a Construction Bankruptcy

Bankruptcies in the construction industry are unfortunately very common. Learn how a mechanics lien can help make sure your company...

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: What Does “Workmanlike Manner” Mean?

Just about every construction contract will require that work be done in a "workmanlike manner." But what exactly does that...

Conditional vs. Unconditional Lien Waivers: The Difference & Why It Matters

Unconditional vs. conditional lien waivers: which type of lien waiver should you use on your construction projects and jobs? We...

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.

Please check your county's webpage if you need disaster assistance. We are ready to help customers impacted by Hurricane Debby. Call 866-204-2219 or click here to report a claim.

• 855-717-0022
• Log In  /  Create an Account

Assignment of benefits

Assignment of benefits is an agreement that gives your claims benefits to someone else.

What is an assignment of benefits?

An assignment of benefits (or AOB for short) is an agreement that gives your claims benefits, and in some instances complete control of your claim, to someone else. It’s usually used so that a contractor can "stand in your shoes" and file a claim, make decisions about repairs, and collect insurance payments from your insurance company directly for covered repairs. In some states, the contractor will even file a lawsuit against your insurer as your assignee.

Why do homeowners agree to an assignment of benefits?

Homeowners may sign an assignment of benefits form because they think it’s more convenient and efficient than dealing with the claims process firsthand.

Once a contractor has been assigned your benefits, they tell the insurance company what work they believe is required and negotiate the claim. For example, say you have a water leak in the house. You call a home restoration company to stop the water flow, clean up the mess, and restore your home to its former glory. The restoration company may ask for an assignment of benefits so it can deal directly with the insurance company without your input. That may sound like a relief at first glance – someone else can deal with all that!

But signing away your rights in the claims process may not be worth the risk.

Assignment of benefits in Florida: a case of rampant fraud

Because the assignment of benefits takes control out of the homeowner’s hands, insurance fraud is a major concern. Some contractors may take advantage of the situation and inflate repair needs and costs or bill for work that was never completed. They may also hire attorneys to sue the insurance company if it does not pay the full amount of their estimate or denies claims.

These lawsuits became a huge problem in Florida – by 2018, there were 135,000 AOB lawsuits , a 70 percent increase in 15 years. On the whole, the FBI estimates fraudulent claims account for nearly $6 billion of the $80 billion appropriated for post-hurricane reconstruction.

Florida eventually passed a bill in 2019 to curb the abuse of the assignment of benefits.

Ultimately, AOB fraud hurts homeowners the most. It increases homeowners insurance rates across the board, and you may be stuck with incomplete work and no recourse.

What responsibilities does the AOB contractor have?

Once you sign an AOB, a contractor has full power to make all decisions about the claim without consulting you. The assignment of benefits gives contractors the ability to:

• File the insurance claim .
• Work directly with insurance claims adjusters.
• Make repair decisions.
• Complete repairs.
• Directly bill the insurance carrier for all work completed.
• Sue your insurance company regarding your claim.

Sometimes the assignment of benefits limits the scope of the work the contractor was hired for. For example, say your home has a leaky pipe. You may hire a plumber to fix the leak, a remediation company to dry the walls and carpet, and a general contractor to replace the bathroom cabinets. Each of the three contractors may have a respective assignment of benefits for their part of the job.

How assignment of benefits impact homeowners

Under some circumstances, an assignment of benefits agreement could work out for homeowners who don’t want to handle their insurance claim. If the contractor is reputable, performs the work, and knows what information the insurance company needs, it can be a big help.

For example:

• The claims adjuster will work directly with the contractor.
• The contractor would handle remediation and repairs.
• The contractor would bill the insurance company, not the homeowner.

AOB arrangements only work for covered damage in need of repair. If you must replace belongings or appliances, you’d still need to work directly with your insurer and payments would go to you.

Protecting yourself in an assignment of benefits agreement

Don’t sign an assignment of benefits agreement right off the bat. Before you hire any contractor:

• Get multiple quotes.
• Check references, licenses, and their insurance.
• Get written estimates for potential work.
• Get a guarantee to back the workmanship.
• Make sure you get to approve the completed work.
• Request copies of all paperwork sent to your insurance company.
• Require that the contractor show you the documents you are actually signing.

You might be tempted to hire the first contractor you find, but you save yourself headaches if you do some due diligence before signing an assignment of benefits. Great contractors use this to expedite repairs and spare you some work. Take a beat to find that great contractor.

Related Posts: Keep exploring

Displaying post 1 / 3

• (303) 292-4525

Legal Question?

Ask us & get answers.

• 303-292-4525 (Tap to Call)
• Send Us An Email
• Directions & Map

Property Insurance Coverage Law In Colorado

After witnessing such total destruction over and over again, and the impact that lack of coverage had on homeowners, the state took action to ensure homeowners had more appropriate coverage.

The Homeowners Insurance Reform Act

The Homeowners Insurance Reform Act impacts both homeowners and homeowners’ insurance providers.

Homeowners :

• Have a responsibility to determine whether or not the amount of coverage they have is sufficient.
• Have the option of collecting 25% of their contents coverage reflected in the policy declaration without requiring a contents inventory.
• Have 3 years from the date of the loss to sue for breach of contract.

Insurance Providers :

• Must have updated policy language that is easy to understand; ideally written at no higher than a 10th grade level.
• Must provide policyholders with an updated estimate of the replacement cost of their home based on construction inflation index. This estimate must be provided every two years.
• Must include at least one year of additional living expense coverage in all homeowners policies for a total of up to 24 months of additional living expense coverage.
• Must provide more detailed disclosures to help policyholders understand what is and isn’t covered by their policy.

What Homeowners Can Do To Ensure They Have Adequate Coverage

The biggest thing to remember is that you, the homeowner, are now responsible for ensuring your home has enough insurance to cover its replacement. Keeping this in mind, homeowners should review their policies at least annually and after any major home improvements to make sure the amount of coverage provided by the policy is enough to cover the cost of rebuilding the home. Work with your insurance agent to determine the right amount, keeping in mind that market value is not the same cost as new construction. Market value includes the cost of the land as well as intangibles like demand and the interest of buyers in living in your area. These factors may drive up the market price of your home, but they don’t affect the cost of rebuilding it if the home is completely destroyed by a wildfire or another accident. Many homeowners mistakenly pay higher premiums for coverage they will never need because of these points of confusion.

On the other hand, there are also many homeowners who don’t have enough insurance to fully cover the cost of rebuilding their home or replacing its contents. Insurers are required to offer policyholders extended replacement cost coverage, which helps protect against situations in which there is not enough base coverage to meet increases costs related to stricter building codes or ordinances.

For more information about obtaining adequate insurance coverage read our post, “ How To Ensure The Insurance Coverage You Have Is The Insurance Coverage You Need .”

Filing A Claim

Homeowners’ insurance exists to protect you from the financial costs of rebuilding or repairing your home after a major incident. If you do suffer a loss, one of the first things you’ll do is contact your insurance company. As a policyholder in good standing you have a right to fair and accurate claims service but in exchange you must work with the insurance company and their adjusters to inform them of the loss and provide access to the property.

The best way to ensure you are receiving all the benefits to which you’re entitled is to become familiar with your policy. Ideally, you will do this well before you need to file a claim, but even if you wait until a claim needs to be filed, knowledge is key to getting the coverage you need. Pay a particular attention to the policy Declarations page. This page will divide your coverage into categories and assign amounts to each category. That amount is the amount of payout you can expect under a total loss scenario. Categories are typically:

• Other Structures, such as detached garages, sheds, etc.
• Personal Property
• Loss of Use/Additional Living Expenses
• Medical Payments
• Special Endorsements

Protect Your Most Expensive Investment With Proper Property Insurance Coverage

If you are confused by your policy’s wording, want a second set of eyes to review the coverage amount or are having trouble getting your claim approved, contact the real estate law attorneys at Schlueter, Mahoney, and Ross, P.C. We can review policies and explain coverage amounts and terms to you, advise you of areas that may be lacking in coverage, help you manage the claims process, or represent you to the insurance company.

For a policy review, contact us at (303) 292-4525 or by filling out the contact form on our Contact Us page.

Our construction law attorneys, Michael A. Schlueter , Elliot D. Fladen , and JR Geraghty represent clients throughout Colorado, including Denver, Aurora, Broomfield, Boulder, Greely, Commerce City, Lakewood, Highlands Ranch, Littleton, Arvada, Westminster, Pueblo, Thornton, Colorado Springs, and Fort Collins.

Related Resources

What to look for in a denver business lawyer: a comprehensive guide, colorado business attorneys help settle civil disputes | commercial litigation, how to establish and maintain your board of directors, starting a new business: what type of business entity is right for you, how the definition of “collapse” can affect property insurance coverage.

• Construction Law , Legal Protection Services

Get Free Legal Answers

Schlueter, Mahoney & Ross, P.C. 700 17th Street, Suite 1300 Denver, CO 80202 (303) 292-4525 (303) 292-1229

©Schlueter, Mahoney & Ross, P.C. All rights reserved. Web Design: ClearPixelDesign Site Map

Disclaimer: Thank you for visiting the website of Schlueter, Mahoney & Ross, P.C. Please note that the information contained on this site is not legal advice, nor is it intended to be legal advice. It should not be relied upon in making any decision in connection with your specific legal situation. We welcome your calls, letters, and emails, however, contacting us does not create an attorney-client relationship

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.

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

Colorado Allows Post-Loss Assignment of Claim Regardless of Insurance Policy Anti-Assignment Clause

Insurance policies commonly include language specifically forbidding an insured from assigning their rights and interests under the policy without the consent of the insurance company.

These anti-assignment clauses typically include some form of language tracking the clause below:

Assignment of Claim Assignment to another party of any of your rights or duties under this policy regarding any claim, or any part of any claim, will be void and we will not recognize any such assignment unless we give our written consent. However, once you have complied with all policy provisions, you may assign to another party, in writing, payment of claim proceeds otherwise payable to you.

In Colorado, a distinction is made between an assignment of an insurance policy before a loss has occurred and the assignment of the benefits due to an insured after a loss. Because it involves a transfer of a contractual relationship which could impact the risk to an insurer, non-assignment clauses of pre-loss transfers are enforceable. 1 This reasoning is intended to protect an insurance company against an increased risk resulting from the assignment to an unknown third party.

By contrast, an assignment after a loss does not constitute an assignment of the personal contract represented by the policy, but only of a claim or right of action on the policy. Under this reasoning, Colorado generally finds post-loss assignments to be valid regardless of any non-assignment clause contained with in the insurance policy as the assignment of a post-loss claim does not impact the risk of an insurance company as liability is already established by the loss. 2 More specifically, the recognized reason for the prohibition of pre-loss assignments without consent of the insurance company – increased risk – is no longer applicable following a loss.

While Colorado does allow the post-loss assignment of a claim regardless of anti-assignment language contained within an insurance policy, the enforceability of these clauses is dependent on the law of each particular state. Always check with an attorney before making an assignment of policy benefits to another, regardless of the situation. ____________________________________________ 1 Parrish Chiropractic Ctrs., P.C. v. Progressive Cas. Ins. Co. , 874 P.2d 1049, 1053 (Colo.1994) (noting that non-assignment clauses in insurance policies are strictly enforced against attempted pre-loss transfers because such assignments materially increase insurers’ risk or obligation). 2 Parrish Chiropractic , at 1053; Rooftop Restoration, Inc. v. Ohio Sec. Ins. Co. , 2015 WL 9185679, at *3 (D. Colo. Dec. 17, 2015) .

Related Posts

Restoration contractors and roofers beware: your assignment of benefits agreements may not hold up in colorado.

Colorado Division of Insurance Introduces Updates to Homeowner Insurance Coverage and Disclosure Requirements

Essential Steps for Denver Policyholders After a Devastating Hailstorm

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

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

Our Positions | Assignment of Benefits

Issues | Our Positions

• Artificial Intelligence
• Aftermarket Parts
• Anti-Steering
• Automated Vehicles
• Auto Affordability
• Distracted/Impaired Driving
• No-Fault Insurance
• Ride-Sharing (TNCs)
• Uninsured/Underinsured
• Corporate Governance Annual Disclosure (CGAD)
• Group Supervision
• Holding Company Act
• Own Risk Solvency Assessment (ORSA)
• Consumer Financial Protection Bureau
• Covered Agreement
• Crop Insurance
• Disparate Impact Rule
• Federal Insurance Office
• Federal Reserve Regulation Impacting Insurers
• Fiduciary Rule
• Financial Stability Oversight Council
• McCarran-Ferguson
• Overtime Rule
• Risk Retention Act
• Capital Adequacy
• Current Expected Credit Loss (CECL)
• Financial Analysis and Examination
• Financial Stability - Macroprudential Oversight
• Group Capital
• Insurance Contracts
• Investment Regulation
• Other Public Accounting Standards
• Receivership/Insolvency - Recovery/Resolutions Plans
• Reinsurance Collateral
• Statutory Accounting Standards
• Cadillac Tax
• Cost-Shifting
• Medicare Secondary Payer
• Cybersecurity
• Drones/Unmanned Aerial Systems
• Electronic Policyholder Communications
• InsurTech/FinTech
• American Law Institute
• Assignment of Benefits
• Civil Justice Reform
• Depreciation of Labor
• Joint and Several Liability
• Noneconomic Damages Caps
• Phantom Damages
• Prejudgment Damages Caps
• Prejudgment Interest Reform
• Self-Evaluative Privilege
• Sunshine Litigation Legislation
• Third Party Litigation Funding
• Conduct of Business
• Market Conduct Annual Statement
• Market Conduct Certification
• Market Conduct Regulation
• Anti-Concurrent Causation Clauses
• Building Codes
• Catastrophe Funds
• Climate Risk
• Disaster Deductibles
• Disaster Mitigation
• Hurricane Deductibles
• National Flood Insurance Program
• Storm Chasers
• Open Rating in Competitive Markets
• Flex-Rating
• Commercial Lines Modernization
• Price Optimization
• Speed to Market
• Federal Tax Reform
• Premium Taxes
• Small Mutual Inflation Update
• TRIA Data Reporting
• Risk-Based Pricing
• Use of Education & Occupation in Undwriting (predictive modeling, big data, tech-driving underwriting tools)
• Use of Weather-Related Claims
• Federalizing the WC System
• Drug Compounding
• Drug Formularies
• Fee Schedules
• Physician Dispensing
• State Reforms
• Opioid Abuse
• Insurance Core Principles

An assignment of benefits, or AOB, is a legal tool that allows an insurer to directly pay a third party for services performed rather than reimbursing a claimant afterwards. In recent years, insurers have experienced an increase in fraud and abuse of assignment of benefit provisions, resulting in higher costs.

Assignment of rights to collect under an insurance policy after a loss are common. In many cases, homeowners will assign the right to collect to contractors or other service providers following a loss. Vendors soliciting AOBs from policyholders are typically associated with property insurance, auto repair, and personal insurance claims. While such assignment may allow policyholders to make emergency repairs more quickly, the practice has resulted in many homeowners becoming the victims of scam artists and other unscrupulous service providers. Contractors have sought to unilaterally establish the value of the claim and demand payment for inflated invoices. Many contractors also work with attorneys that then sue the insurance company over the claim.

State legislatures have sought to protect insurance consumers from AOB abuse by imposing common sense limitations, and 2019 finally saw some progress. For example, for the past several years, the Florida legislature has sought to put some parameters around the use of assignment of benefits to curtail the explosion of lawsuits filed by contractors and attorneys allegedly on behalf of consumers who knew nothing about the lawsuits. The only beneficiary of such fraud were the unscrupulous lawyers and contractors. In 2019, AOB reform legislation finally passed the Florida legislature, and was signed into law by the governor. Among other things, the new law gives policyholders the right to rescind the contract, and mandates that the assignment include an itemized description of the work to be done. Similarly, governors in North Dakota, Kansas, and Iowa all signed into law NAMIC-backed legislation to protect consumers from abusive assignment of benefit practices.

NAMIC Position

Namic news on assignment of benefits.

Erin Collins Senior Vice President - State and Policy Affairs

804.878.6473

  Erin

Political Action

News & media.

An overview of Colorado Assignment of Benefit Laws.

10-16-317.5.   Assignment of benefits.

(1) An individual or group nonprofit hospital or medical service contract issued pursuant to the provisions of this article shall not prohibit a subscriber under the contract from assigning, in writing, benefits payable under the contract to a licensed hospital or other licensed health-care provider for services provided to the subscriber which are covered under the contract.

(2) When a licensed hospital or other licensed health-care provider receives an assignment from a subscriber it is the responsibility of the provider to bill the contract issuer, including a copy of the assignment, and to mail a copy of such bill to the subscriber or certificate holder, stating on such copy that it is for informational purposes only and that the payer has been billed for covered benefits. The issuer of such nonprofit hospital or medical service contract shall honor such assignment and make payment of covered benefits directly to such licensed hospital or other licensed health-care provider. In the event the issuer fails to honor such assignment by making payment to the subscriber and the subscriber, upon receipt of such payment, fails to timely pay an amount equivalent to such payment to the licensed hospital or other licensed health-care provider, then the issuer shall be liable for such covered benefits payment directly to the licensed hospital or other licensed health-care provider. It shall be the responsibility of the licensed hospital or other licensed health-care provider to notify the issuer if timely payment has not been received. In such case, the issuer shall make payment of covered benefits pursuant to section 10-3-1110 (2) within thirty days after receipt of such notification.

(a) Nothing in this section shall be construed to limit any nonprofit hospital, medical-surgical, and health-care service corporation from determining the scope of its benefits or services or any other terms of its subscriber contracts, nor from negotiating contracts with licensed providers on reimbursement rates or any other lawful provisions.

(b) Notwithstanding the provisions of subsection (2) of this section, a licensed provider shall not be entitled to payment greater than the lesser of its charges or any level of reimbursement previously negotiated with any nonprofit hospital, medical-surgical, and health-care service corporation, if applicable; nor shall such payer have any obligation under this section except for covered benefits.

(4) Nothing in this section shall be construed to prevent any nonprofit hospital, medical-surgical, and health-care service corporation from limiting covered benefits to services provided by providers who have contracted with such corporation or from providing different levels of benefits depending on whether the provider has or has not contracted with such corporation.

10-16-106.7.   Assignment of health insurance benefits.

(a) Any carrier that provides health coverage to a covered person shall allow, but not require, such covered person under the policy to assign, in writing, payments due under the policy to a licensed hospital or other licensed health-care provider; an occupational therapist, as defined in section 12-270-104 (9); an occupational therapy assistant, as defined in section 12-270-104 (11); or a massage therapist, as defined in section 12-235-104 (5), also referred to in this section as the “provider”, for services provided to the covered person that are covered under the policy.

(b) The covered person may, with or without the agreement of the provider, revoke the assignment. Such revocation shall be in writing and shall be sent to the carrier. The carrier shall send a copy of the revocation to the provider who is the subject of the revocation. The revocation shall be effective when it has been received by both the carrier and the provider and shall only affect those charges incurred after such receipt by both.

(a) When a provider receives an assignment from a covered person, it is the responsibility of the provider to bill the carrier and notify the carrier that the provider holds an assignment on file. The carrier shall honor the assignment the same as if a copy of the assignment had been received by the carrier. Only upon request of the carrier shall the provider be required to give the carrier a copy of the assignment.

(b) The carrier shall honor the assignment and make payment of covered benefits directly to the provider. If the carrier fails to honor the assignment by making payment to the covered person and if the covered person, upon receipt of such payment, fails to pay an amount equivalent to such payment to the provider within forty-five days, the carrier shall be liable for the payment directly to the provider. It shall be the responsibility of the provider to notify the carrier if payment has not been received. In such case, the carrier shall make payment of covered benefits as specified in section 10-16-106.5.

(c) If the provider collects payment from the enrollee and subsequently receives payment from the carrier, the provider shall reimburse the enrollee, less any applicable copayments, deductibles, or coinsurance amounts, within forty-five days.

(3) Nothing in this section shall be construed to limit a carrier’s ability to determine the scope of its benefits, services, or any other terms of its policies, or from negotiating contracts with licensed hospitals or other licensed health-care providers on reimbursement rates or any other lawful provisions.

Source: 10-16-317.5 10-16-106.7

Our Dental Community Sponsors

Watch CBS News

Historic Denver hopes to preserve old power plant to benefit community

By Michael Abeyta

August 10, 2024 / 5:55 PM MDT / CBS Colorado

John Deffenbaugh, the president and CEO of Historic Denver, says he can hardly imagine the city without its first and oldest power plant.

Owned by Xcel, the Zuni Generation Station at 1335 Zuni Street shut down in 2015. The plant was added to the Colorado Most Endangered Places list .

"It's been a prominent fixture by the river in Denver for over 123 years," said Deffenbaugh. "Its existence has been critical to Denver, its western expansion. It's literally the building that powered the growth of Denver."

Deffenbaugh says his group now wants to see it revamped.

"These buildings, the sense of scale they have, which is very unusual for structures in this day and age that's so compatible for a great range of uses," said Deffenbaugh.

He says other communities have turned their old power plants into everything from rec centers, part of a soccer stadium, offices and commercial buildings.

But time has not been kind to it. Deffenbaugh says that isn't a huge obstacle for them.

"We appreciate the magnitude of the scale ahead, but great cities do great things," said Deffenbaugh.

The biggest obstacle is that Xcel currently owns the building and Historic Denver knows what they want to do with it.

"We hope (it) isn't the wrecking ball," said Deffenbaugh.

He says they have tried to work with Xcel to organize a forum involving the community and the city and they've written to the mayor's office to seek a meeting with the city to discuss the issue. They're hoping to get something set up soon because, in an area that is seeing a lot of private development, he wants at least one thing to be for the community.

"The local neighborhood would like to flip the script and have this building, which has been a polluter, turned into a community asset," Deffenbaugh said.

Michael Abeyta is a general assignment reporter/MSJ for CBS News Colorado. Read his latest reports or check out his bio and send him an email .

Featured Local Savings

More from cbs news.

Girl Scouts of Colorado invites all to explore future careers at event

Colorado neighbors fight against proposed asphalt plant

Police seeking Dodge pickup truck with no license plates after shooting

Tenants of condemned apartments have less than a week to find housing