Post-storm recovery: Be careful what you sign!

Guest Post from Kansas Insurance Commissioner Ken Selzer

Kansans who have insurance claim money following a storm need to be sure to know your rights and responsibilities “before you sign on the dotted line” with a contractor.

I urge all Kansas homeowners to know what control you have or don’t have if you are considering a post-loss assignment of a claim to a contractor. You need to realize that you may give up any control over how the claim money is used or how the work is completed.

A post-loss assignment of a claim is a contract signed by the homeowner, after a covered loss, that grants a contractor all rights and duties of the claim under the insurance policy. This could be for any damage to insured property, such as a roof, siding, gutters, deck, windows or other household features.

Once that contract is signed, the contractor now owns all rights and duties to the claim. There are several ramifications of that:

• If there is a disagreement between the contractor and the insured, the contractor may file a suit against the insurer in the policyholders’ name. The policyholder has no rights in the suit, and the suit could have an impact on future rates and insurability.
• The policyholder could be financially responsible to the contractor for the difference in the contractor’s price and the insurer’s payment.
• The policyholder could lose any ability to seek further action against the insurer because his/her rights have been assigned to the contractor.
• If a policyholder signed the agreement and then wishes to fire the contractor, that contractor still has claim to the insurance payment.

A homeowner is not required to sign a post-loss agreement.  I would urge homeowners to get a legal opinion before signing any agreement. Also, be sure to thoroughly check out the potential contractor by seeking recommendations from friends, co-workers, the Better Business Bureau and others.