Enforceability of Assignments of Benefits

Clarifying CA v. Montgomery-Sansome

In December 2021, a California trial court decision caused confusion in some circles regarding contractors’ use of Assignments of Benefits (AOB). The case, entitled California v. Montgomery-Sansome, is not about AOBs. The case is about illegal public adjusting and the failure to comply with California’s strict rules about what must be included in home improvement contracts.

The contractor was engaged in the extraordinary practice of advertising that he would provide insurance claim negotiating services. The court found that he was adjusting many parts of the claim unrelated to the work customarily done by restorers, including additional living expenses. He was also involved in preparation of proofs of loss.

First off, this is a ruling by a trial court–not an appellate court. Trial courts do not make law; they merely decide outcomes of individual disputes. This case does not impact California law, and is not binding on other courts or other parties.

Secondly, public adjusting is when an individual is representing someone else on an insurance claim. In the State of California and many others, to represent someone in an insurance claim, one must have a public adjuster’s license or a law license. Here, the advertising amounted to an offer of public adjusting services, and the contractor was found guilty of false advertising and illegal public adjusting.

Thirdly, California has strict laws that apply to residential contracts. These laws have specific requirements for what is to be included in the contract. Such requirements include price, scope, and the project completion date. (See example.) The court found that the contractor did not intend to perform work as set forth in his estimates, and the estimates included fake numbers referred to by the contractor as “placeholders.”

Key Takeaways:

1. Don’t offer to be the negotiator for a policyholder on an insurance claim
2. Keep advertising truthful
3. Use contracts that comply with California’s Home Improvement Contract Laws
4. Don’t write “fake” estimates with placeholder numbers

Watch the video to understand the contractor’s illegal actions and gain an understanding on public adjusting and the proper use of assignments of benefits.

Unsure if your contracts are putting your company at risk with the law? Read the California Selected Statutes to ensure compliance, or have an attorney review your contracts annually.
Need California contracts? Check out The Cleaning and Restoration Contract Package.