AB 473

This bill establishes certain requirements and restrictions on the assignment to residential contractors of postloss rights and benefits under property insurance policies. Under the bill, “residential contractor” is defined to mean a person who is in the business of contracting to repair or replace residential roof systems or to perform any other repair, replacement, or reconstruction work to address damage to residential real estate caused by a catastrophe or a person who offers to contract with an owner or possessor of residential real estate to carry out such work. “Residential contractor” includes a person who is in the business of contracting to remove trees, repair trees, or provide other related services. Under the bill, “catastrophe” means a natural occurrence that damages or destroys residential real estate and includes fires, floods, hail storms, tornadoes, windstorms, and any other naturally occurring weather event for which the governor declares a state of emergency.

First, the bill prohibits residential contractors from advertising or promising to rebate any insurance deductible or any portion of an insurance deductible as an inducement to the sale of goods or services. The bill further provides that no residential contractor may represent or negotiate on behalf of, or offer or advertise to represent or negotiate on behalf of, an owner or possessor of residential real estate for any insurance claim in connection with the repair or replacement of roof systems or the performance of any other exterior repair, exterior replacement, or exterior reconstruction work on the residential real estate. Any residential contractor contracting to provide goods or services to repair damage resulting from a catastrophe must provide certain written disclosures either prior to or contemporaneously with entering into the contract.

Second, the bill provides that any postloss assignment of rights or benefits under a property insurance policy insuring residential real estate by a named insured to a residential contractor is subject to certain restrictions and must meet certain criteria. For example, the bill provides that any such postloss assignment must include an itemized description of the work to be performed, an itemized description of the materials, labor, and any fees for the work to be performed, and a total amount to be paid for the work to be performed. The bill also provides that the named insured for any such postloss assignment has the right to cancel the assignment for any reason within five business days. The bill requires any such assignment to include certain written disclosures of this right. Further, the bill prohibits a residential contractor from accepting an assignment of rights or benefits under a property insurance policy insuring residential real estate unless the contractor may obtain a building permit for the work to be performed under current law.

The bill provides that a contract entered into with a residential contractor is void if the residential contractor violates any provision of the bill. If a residential contractor violates any provision of the bill, the commissioner of insurance may, after notice and hearing conducted pursuant to current law, impose a forfeiture not to exceed $10,000 per violation. Additionally, if the commissioner of insurance has reason to believe that a residential contractor is violating any provision of the bill, the commissioner, the attorney general, or the district attorney of the proper county may investigate and may, in addition to any other remedies, bring an action in the name and on behalf of this state to enjoin the residential contractor from the violation.

Finally, the bill creates and restricts certain legal rights that result from the assignment of postloss rights or benefits under a property insurance policy insuring residential real estate by a named insured. If a residential contractor accepts a postloss assignment, the residential contractor must pursue payment only from the property insurance company until all legal rights against the property insurance company are exhausted. If a named insured grants a postloss assignment of rights or benefits under a property insurance policy to a residential contractor, the property insurance company must automatically, by operation of law and without further action by any party, receive an assignment of the named insured’s rights against the residential contractor under the terms of the contract with the residential contractor and under state law. A named insured who grants a postloss assignment of rights or benefits under a property insurance policy to a residential contractor may not pursue any noncontractual claims against the property insurance company. A residential contractor who accepts a postloss assignment of rights or benefits under a property insurance policy insuring residential real estate may pursue a noncontractual claim against the property insurance company only if the conduct that the claim is based on occurred before the assignment and is related to the loss for which the work is being performed.