ARIZONA STATE SENATE

RESEARCH STAFF

ZACK DEAN

LEGISLATIVE RESEARCH ANALYST

TRANSPORTATION & PUBLIC SAFETY COMMITTEE

Telephone: (602) 926 -3171

TO:                  MEMBERS OF THE SENATE

                        TRANSPORTATION AND PUBLIC

                        SAFETY COMMITTEE

DATE:            February 18, 2019

SUBJECT:      Strike everything amendment to S.B. 1013, relating to assignment of claims; insurance

Purpose

Establishes requirements for assignment agreements between an insured and an assignee arising from property claims.

Background

Assignability of an insurance policy refers to the ability of an insurance policy owner to permit another party, or the assignee, to receive benefits or payments directly from the insurer, rather than the owner paying a third party for rendered services with payments received from the insurer. The ability of an owner to assign claims under an insurance policy is usually outlined in what is more commonly referred to as an assignment of benefits clause contained in the insurance agreement.

            Current statute states that any life or disability policy, as allowed by the terms under the policy, may be assigned either by pledge, transfer of title or by sole assignment of the insured and deliverance of the assignment to the insurer, regardless of whether the assignee is the insurer. The assignment of a policy entitles the insurer to deal with the assignee as the owner in accordance with the terms of the assignment until the insurer receives written notice of termination of the assignment (A.R.S. § 20-1122).

There is no anticipated fiscal impact to the state General Fund associated with this legislation.

Provisions

1. Requires an assignment agreement to disclose the material provisions of the assignment, as well as all of the following:

a) whether the insured remains liable for any costs not covered under the insurance policy;

b) any interest rate that will be charged to the insured if payment to an assignee is delayed after receiving payment from an insurer; and

c) whether the assignment agreement authorizers the assignee to sue the insurer.

2. Requires the above provisions listed in the assignment agreement to be displayed in at least 14-point font and separately acknowledged by the insured.

3. States that an insured is not prohibited from directing the insurer to issue payment to a third party for services rendered related to a property claim, as long as the insured notifies the insurer of the proposed direct payment.

4. Prohibits an assignment agreement from both of the following:

a) requiring an insured to indemnify an assignee from damages and liabilities arising out of the agreement; and

b) preventing or inhibiting an insurer from communicating with the insured or lienholder.

5. Requires an insured and an assignee, in order to effectuate an assignment agreement, to comply with all of the following:

a) the property claim is submitted to an insurer by an insured;

b) the assignment agreement provided to the insured by the assignee complies with requirements as outlined; and

c) a copy of the agreement and an estimate or itemized statement of the costs for services rendered is provided to both the insured and insurer.

6. States that an insurer and insured have the right to inspect materials and workmanship of services provided by an assignee.

7. States that an insurer and insured have the right to resolve any materials or workmanship disputes before an assignee is paid in full.

8. Requires an assignee, in the event of a good faith dispute, to exhaust any dispute resolution procedures set forth in an insurance policy before additional interest for balance due can be charged, if such interest is not covered by the insurance policy.

9. States that the contractual terms arising out of a property claim between an insurer and a service provider control in the event of a conflict between the contract and the provisions of this legislation.

10. States that creating any new private right or cause of action, or limiting any existing common law causes of action is not the intent of this legislation.

11. Makes technical changes.

12. Becomes effective on the general effective date.