Assignment Of Proceeds

Professionals who obtain insurance assignments avoid the potential for the misappropriation of insurance proceeds and the possibility of performing work for “judgment-proof” property owners.Although property owners continue to be liable in accordance with the terms of their restoration-services contracts, assignments of insurance proceeds open the door to recovery directly from the insurance company.By obtaining an assignment of insurance proceeds and putting the insurance company on notice of an assignment from the property owner, however, a restoration contractor is legally entitled to payment directly from the insurance company.

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Once a right has been “assigned,” the recipient, or transferee, stands in the shoes of the prior owner, or transferor, and obtains the rights the transferor had prior to the assignment.

Almost any right can be assigned, including the right to insurance proceeds.

In some situations, property owners would pay for restoration work but insurance companies have wrongfully denied benefits or otherwise wrongfully withheld payment.

In these cases, property owners may not have the financial means to pursue their insurance companies.

Under Ohio law, assignments of insurance executed after a covered loss are valid notwithstanding an anti-assignment clause in an insurance policy.

This means that even though the policy may have an anti-assignment clause, it is ineffective to prevent an insured from assigning the benefits of the policy to a restoration professional. Protecting your Right to Payment It is important to consult with knowledgeable legal counsel if you are considering using assignments of insurance benefits to protect against non-payment. When property is damaged by water, wind, hail, fire or a number of other occurrences, the restoration of the property is often funded by the proceeds of an insurance policy.Generally, the insurance company is obligated to pay the property owner.If the insurance company refuses to acknowledge the assignment and continues to pay the property owner, or otherwise refuses to pay the contractor, the restoration professional has the right to enforce the assigned insurance policy and the insurance company can be held liable for non-payment.Liability exists even if the insurance company has already paid the owner, for example, in situations where the property owner refuses to release funds to the restoration contractor.Anti-assignment clauses generally state that insured property owners may not assign or in any way transfer any rights or benefits of their insurance policies to third parties without prior written consent.Insurance companies commonly rely upon these provisions to argue that insurance assignments to restoration professionals are ineffective.The insurance company or third-party representatives may assist with locating potential contractors and estimating restoration costs.When inspecting the loss and drafting an estimate, the restoration contractor communicates with the property owner, insurance adjuster, and any third-party representatives to identify applicable insurance policies.The property owner—the party who traditionally enters into a contract with a restoration professional—is then obligated to pay for remediation and restoration work.If the property owner misuses insurance proceeds or refuses to pay after work has been performed, restoration contractors often find themselves with little recourse.

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