🏠 GEM Resource Hub · 📚 Library · 📘 About RocketLevel · 📘 Playbooks · 🗺️ What's Your Market Worth? · 📅 Book a Call
Two places commercial contracts quietly shift risk, and what to watch for
A RocketLevel awareness guide, backed by decades of experience in the trade. Commercial work runs on contracts that move risk and payment around, and two areas catch restorers out: assignment-of-benefits (AOB) rules, and how risk transfers between you and your subcontractors. This is literacy on what to watch for.
<aside>
⚖️
Reviewed October 2026. Assignment-of-benefits rules and contract risk-transfer law change, and they vary by state. Use this page to know what to ask, then confirm with your state agency or a construction attorney before you rely on it.
</aside>
Assignment of benefits (AOB)
- An AOB transfers the owner's insurance-claim rights and payment to you, allowing direct billing to the carrier.
- AOB is regulated state by state, and the rules differ for pre-loss versus post-loss assignments. Four states are read against the statute text here (state rules as of October 2026). Three of them void post-loss assignment on commercial property, not only residential. Florida: Fla. Stat. 627.7152(13) makes any assignment of post-loss benefits under a residential or commercial property policy issued on or after 1 January 2023 void, invalid, and unenforceable (Senate Bill 2-A, passed in the December 2022 special session). A form that worked there in 2021 is worth nothing on a policy written today. Louisiana: R.S. 22:1275 bars soliciting or accepting an assignment of any post-loss benefit under a residential or commercial property policy and makes the agreement null and void, carving out federally insured financial institutions, mortgagees, and later purchasers of the property. Oklahoma: 36 O.S. 1230 runs the same way across auto, residential and commercial property policies, with the same lender and mortgagee carve-outs. Kansas is narrower: Senate Bill 55, signed in 2026, reaches residential property policies only and does not touch a commercial assignment.
- Those four are the ones read here, and the list is not the whole country. Other states restrict AOB in ways this page has not verified, and a state missing from that list is not a state that allows it. Look up your own state's insurance code before you sign an assignment or build a billing process on one.
- Contractors often reach for a direction of pay instead, and whether it is actually safer depends on where you work. Confirm what your state allows before you rely on either, and never treat a national template as valid everywhere.
- Use any AOB or authorization transparently. Whatever instrument you use, the owner should understand plainly what they are signing and what control they keep. Walking a distressed owner through it, or choosing a direction of pay instead, builds the trust that earns the next job. Pressuring someone in the middle of a loss to sign damages your reputation and is exactly what draws regulator attention to the practice.
Subcontractor risk transfer
When you run commercial work with subs, the contract is where risk shifts, in your favor or against you:
- Indemnification and hold-harmless clauses decide who pays when a sub causes a loss. Know which way yours run.
- Additional-insured endorsements from your subs extend their coverage to protect you, the same way your clients require it from you.
- Waiver of subrogation and certificate of insurance (COI) flow-down (requiring subs to carry and prove the same coverages you must) keep the risk where it belongs.
Pay-when-paid and pay-if-paid do different things
Restorers often get this term backwards, and the difference is the difference between a timing arrangement and a risk transfer.
Pay-when-paid fixes the usual time for paying the sub, with an implied understanding that the sub gets paid within a reasonable time whatever happens upstream. It is a timing clause. How courts read it varies by state, and the cases named below are the only ones checked here.
Pay-if-paid makes the owner's payment to you a true condition precedent to your payment to the sub. If the owner never pays, the sub never gets paid. The clause moves the owner's credit risk onto a company with no contract with the owner, and that is why a number of states strike it down.