Washington proposes outlawing assignment of benefits in property claims, with violators facing fines up to $50,000 per violation.
Senate Bill 6178, sponsored by Senators Victoria Hunt, Adrian Cortes, Noel Frame, and T'wina Nobles at the request of the state's Insurance Commissioner, would make such assignment agreements void and unenforceable across Washington. The bill is currently under consideration in the 69th Legislature's 2026 Regular Session.
Assignment of benefits involves a contractual agreement that, once signed, transfers the insurance claim rights and benefits within the policyholder's insurance policy to a third party. This contractual arrangement usually involves a restoration or mitigation contractor doing some or all of the repairs of the covered property.
The legislature's findings in the bill explain what these agreements can allow. According to the bill text, a post-loss assignment agreement can allow the third party to collect insurance payments without the involvement of the policyholder, restrict communications on the claim to prohibit the policyholder's involvement, and sue the insurance company without the consent of the policyholder.
The proposed legislation distinguishes between assignment agreements and simpler direct payment arrangements. The bill states that this assignment agreement is different from the policyholder authorizing direct payment to the restoration or mitigation contractor from the insurance company.
The bill also clarifies that it is different from the assignment clause found in the conditions section within a property policy that prohibits the policyholder from assigning the policy to another entity unless approved by the insurance company.
Under the bill's framework, violating the prohibition could prove costly. The Insurance Commissioner would have authority to impose fines of up to $50,000 per violation, with collected fines going to the state's general fund.
The legislation does carve out several exceptions. Policyholders would still be permitted to work with licensed public adjusters under written agreements to represent solely the policyholder's financial interest on the loss. Attorney contingency fee arrangements compensating the attorney based on a percentage of a monetary recovery as permitted by the rules of professional conduct would also remain permissible, as would assignments to federally insured financial institutions, mortgagees, or subsequent purchasers of the property. The restrictions would not apply to liability coverage under personal or commercial line insurance policies.
The bill defines an assignment agreement as any instrument by which post-loss benefits under any property insurance coverage, including but not limited to any right of action against the insurer or any proceeds acquired from the insurer, are assigned or transferred to a person providing services to the insured. Those services include inspecting, protecting, repairing, restoring, constructing, or replacing the insured's property, or mitigating the insured's property against further damage.
In explaining the rationale behind the legislation, lawmakers emphasized that the relationship between the policyholder and the policyholder's insurance company is one affected by the public interest. The bill states that consumer protections in claims handling as set forth in the insurance code are intended for the benefit of the policyholder. The legislature's intent is that the policyholder be the entity that has control of the policyholder's property claim with the policyholder's insurer.
The bill also clarifies that nothing in the legislation prohibits an insured from authorizing or directing payment to, or paying, a person for services, materials, or any other thing which may be, or is, covered under an insurance policy.
The Insurance Commissioner's request for this legislation would add a new section to chapter 48.30 of the Revised Code of Washington if enacted. The bill now moves through the legislative process where it will face scrutiny from industry stakeholders and contractor groups.
