In the aftermath of property damage, homeowners often face a stressful and confusing path to recovery, navigating complex insurance claims while arranging for urgent repairs. A legislative proposal currently under consideration in the Washington State Legislature, known as Senate Bill 6178, seeks to fundamentally alter this landscape by targeting a common practice known as assignment of benefits (AOB). Introduced during the 2026 Regular Session, the bill would prohibit policyholders from signing over their insurance claim rights and benefits to third-party contractors. This practice, while sometimes convenient for homeowners, has raised concerns about inflated claims, litigation, and a loss of control for the insured. The proposed legislation represents a significant effort to regulate the post-loss environment, aiming to keep the contractual relationship squarely between the insurer and the policyholder, thereby preventing contractors from stepping into the shoes of the insured to negotiate and litigate claims directly. The bill’s outcome could reshape how restoration and mitigation services are contracted and paid for across the state.
The Scope of The Proposed Prohibition
At the heart of Senate Bill 6178 is a clear and direct prohibition against post-loss assignment of benefits agreements for property insurance claims. The legislation would make it unlawful for any individual or entity, typically a restoration or mitigation contractor, to “solicit, coerce, require, or contract with any insured” for the purpose of obtaining an assignment of their insurance policy benefits. Any AOB agreement secured in violation of this proposed ban would be rendered legally “void and unenforceable,” effectively stripping it of any power. To ensure compliance, the bill grants significant enforcement authority to the Washington Insurance Commissioner. Under the proposal, the Commissioner could take action pursuant to RCW 48.02.080 and has the power to impose a substantial fine of $50,000 for each violation. Demonstrating the state’s interest in curbing this practice, all financial penalties collected through these enforcement actions would be directed into the state’s general fund, rather than being allocated to a specific industry or regulatory body.
Navigating The Bill’s Key Exemptions
The legislative framework of the bill carefully distinguished the prohibited assignment of benefits from other common financial arrangements in the insurance claim process. It explicitly clarified that the ban would not interfere with a policyholder’s right to authorize direct payment to a contractor for services rendered and covered by the policy. This provision was designed to ensure that the flow of funds for completed work remained undisrupted. Furthermore, the proposal outlined several critical exceptions where an assignment would still be permissible. These exemptions included written agreements with licensed public adjusters, who are hired to represent the policyholder’s interests, and attorney compensation agreements structured on a percentage of the recovered amount. Additionally, the ban did not apply to assignments made to federally insured financial institutions or mortgagees, nor did it affect transfers related to liability coverage under a policy. This careful delineation ensured the legislation targeted a specific type of AOB agreement while preserving established and regulated industry practices.
