Postloss assignment of rights or benefits under property insurance policies to residential contractors and providing a penalty. (FE)

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.