Editor’s Notes

In recent decades there has been an unfortunate practice in which unscrupulous contractors descend on storm-damaged areas to offer homeowners a deal. If the homeowner assigns its rights under its homeowners’ insurance policy to the contractor, the contractor will negotiate with the insurance company and repair the damage to the property, all at no charge to the homeowner.


The results of this practice have included high-pressure sales tactics, collusion, unnecessary repairs, exaggerated charges and excessive litigation against homeowners’ insurers. State legislatures, prompted by the insurance industry, have responded in two ways. The use of these “assignment of benefit” arrangements has been prohibited or severely limited. And, public insurance adjusters, who represent property owners in their dealings with insurers, have been subjected to licensing requirements.


The Supreme Court of Iowa recently addressed an assignment of insurance benefits to a contractor. The assignment ran afoul of both state statutes – the prohibition of assignment and the public adjuster licensing requirement. Hence, the assignment was void and unenforceable.


The other case in this issue involves a contractor’s right to payment after its contract with a public authority was judicially ruled invalid. A California court said the contractor was not entitled to recover performance costs incurred prior to invalidation. The public project owner had not been solely responsible for the improper contract award.





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