Validity of Assignment of Insurance Benefits in Louisiana:
Whether you’re a policyholder or contractor, you may be wondering whether or not it’s legal to agree to an assignment of insurance benefits. This question usually comes up after a major loss event like Hurricane Ida which recently hit us hard in South Louisiana. If you’re a policyholder, you may negotiate a deal with your contractor such that he agrees to do all of the restoration work on your home or business in exchange for all of the approved insurance proceeds paid by your insurance carrier (less the named storm deductible). This can be a good deal for both parties. The policyholder only has to enter into one remediation contract. All of the damage will be repaired by one contractor company the policyholder trusts. And the contractor can begin the project knowing he’ll get paid for all of the remediation work.
The short answer is that, in Louisiana, you can so long as the roofing contractor assignment of benefits (or other type) is not prohibited by the insurance policy. But not all exclusions will apply. If there’s an anti-assignment clause in the insurance policy, it must be specific as to what kind of assignments of insurance benefits are prohibited. A general exclusion against assigning an entire insurance policy does not apply to assignment of post-loss benefits: In In re Katrina Canal Breaches Litigation the Louisiana Supreme Court held:
“There is no public policy in Louisiana which precludes an anti-assignment clause from applying to post-loss assignments. However, the language of the anti-assignment clause must clearly and unambiguously express that it applies to post-loss assignments, and thus it must be evaluated on a policy by policy basis.“
Enforceability of Assignment of Insurance Benefit Contracts:
It’s difficult to know whether the insurance policy has an enforceable exclusion before the contract is signed. That’s why it’s a good idea for the contract to contain alternative payment options. For example, the policyholder may agree to be personally liable for the work done to the property. And the contractor may claim a lien on the property to guarantee payment. If alternative payment options are included, a savings and reformation clause should be included in the contract in order for it to be enforceable in court.
Summary:
- Yes, assignments of insurance benefits are legally valid under Louisiana law.
- The insurance policy can prohibit assignments. But the exclusion must be specific in order to apply to post loss assignments.
- Including other payment options is a good idea. So is including a savings and reformation clause in the contract.
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