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Certificates of Insurance Q&A
Bill Wilson |
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Abstract
Recently we conducted teleconferences on certificates of insurance based on our white paper, "Certificates of Insurance: Issues and Answers." Following these teleconferences, we received a number of questions which, along with "answers," are presented on this page.
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 "I am in the process of updating our policies and procedures manual and am now on the cancellation section and I have a few questions regarding certificates.
"1. Can we to refuse to issue a certificate of insurance if the policy is pending cancellation?
"2. Are we obliged to issue the certificate?
"3. If we do issue a certificate, do we show the full policy term or should we enter the pending cancellation date?"
 1. The agency and carrier can refuse to issue a certificate for any reason. Pending cancellation is certainly a good one.
2. The agency doesn't have to honor a certificate request from anyone. There's nothing in the insurance contract that requires compliance to a request from a third party or even the insured. Of course, failure to do so may result in the loss of the account, but there's no contractual or moral obligation unless provided for by the policy (e.g., a mortgagee) or endorsement (e.g., loss payable clause).
3. The certificate is a snapshot in time of coverages and policy terms at the instance of issuance. I don't think the agency has an obligation to a third party to provide anything more than what is on the certificate...i.e., no explanations not indicated on the certificate itself are necessary.
If a cancellation is pending and unlikely to be withdrawn, I'd be inclined to not mislead anyone and politely decline the request to issue one since, if anyone pays any attention to the "will endeavor to" cancellation language on the certificate, notice of cancellation would be forthcoming. By making this a formal procedure and applying it without exception by all agency staff, the agency has something to fall back on.
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"Certificate of Insurance question. Waivers and additional insureds are going to be different wording based on the company writing the coverage. It has been our agency practice for years to insert on the ACORD certificate and oil company certificates what the endorsement restrictions/exclusions are. Is this a good practice? What are your recommendations?"
Here are some thoughts from the VU faculty:
It shouldn't hurt unless your insert is broader or more restrictive than the policy. If you are summarizing coverages you might want to make a report to your E&O carrier about a potential claim.
Consider attaching a Certified Copy of the policy.
I agree that it is good to list the information but would rather you just staple a copy of the endorsement to the certificate and let them read it for themselves. That way it is the insurance form wording and you will not inadvertently mislead with your own wording.
The ACORD certificate for liability insurance has, since 1997, required the completer of the certificate to list the endorsement on a policy that are exclusions. So you have been doing the right thing. Until that requirement is changed, it would be good practice to continue this, because some agents are being sued for misrepresenting coverage; that is, by not listing the exclusionary endorsements, in cases where they apply, they are representing to the certificate holder that none applies. Keep doing it!
With the permission of your insured, I would insert only the information called for by the contract and ACORD form, without changing any of the existing wording. The ACORD form provides for the following:
DESCRIPTION OF OPERATIONS / LOCATIONS / VEHICLES / EXCLUSIONS ADDED BY ENDORSEMENT / SPECIAL PROVISIONS
This is what the ACORD Forms Instruction Guide says about this information block:
Record information necessary to identify the operations, locations or vehicles for which the certificate was issued. Any exclusion endorsement or special policy conditions should also be indicated.
Information about additional insureds should also be shown here. However, if it is necessary to show several additional insureds for liability coverages (e.g., mortgagees, vendors, landlords, etc.), and there is not enough room on the form, use the Descriptions box to indicate "see Additional Interest form, ACORD 45, attached" and use ACORD 45 to show the information pertinent to the additional insureds.
Be wary of non-ACORD forms. Do not issue one without the express permission of the insurance company (it's preferable to have the insurer do it), make sure the language does not incur liability for the agency to do something not called for in the underlying policies, and don't issue a certificate that is an obvious ripoff (i.e., copyright violation) of the ACORD form.
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"If our agreement with a wholesaler/E&S broker states that we can issue a certificate, can we do so even if we are not the agent for the carrier? When there is a pending cancellation, is it correct to make the expiration date the date of cancellation? Consider a certificate 2/15/07 with the 30 days cancellation notice, a certificate is issued and then a cancellation is issued that day or the following date...how are we providing 30 day notice? We're in New York"
Here are some thoughts from the VU faculty:
N.Y. Insurance Law does not address the question of who may issue a certificate of insurance. This is a contractual matter between the retail agent, the wholesaler, and the insurer. The only restriction the Insurance Department has stated about certificates is that they can’t be used to change a policy (see circulars from 1995 and 1998). The laws and regulations governing excess line brokers do not mention certificates at all.
Many questions with no good answers.
First, you ask, "if our agreement with the wholesaler states that we can issue a certificate, can we do so even if we are not the agents for the carrier?" Only if the wholesaler has the right to issue certificates and delegate that to you. Be very careful and get authorization in writing from the wholesaler before doing so — it won't protect you but might give you a right to indemnity back against the wholesaler.
When there is a pending cancellation, is it correct to make the expiration date the date of cancellation? I would make sure that the certificate holder knows that the date of expiration is a cancellation date.
Regarding the question, "a certificate 2/15/07 with the 30 days cancellation notice, a certificate is issued and then a cancellation is issued that day or the following date, how are we providing 30 day notice?" You are only required to give them notice of the cancellation — if the date of cancellation is earlier, it becomes impossible and the Additional Insured or Certificate Holder may have 30 days of insurance even if the named insured does not.
Technically, the retailer should not be issuing a certificate that is the wholesaler's job. But if the wholesaler does not mind, you should not do it until you have written permission. Even though written permission is obtained, the retailer should not issue notices of cancellation or nonrenewal. The retailer's sole role would be to issue certificates solely for informational purposes and nothing else. If you go beyond that role, you can expect problems.
An agent lost a case regarding a certificate expiration date when the policy expiration date was entered (12/31) instead of the pending cancellation date (8/7). The loss occurred 9/10, after the policy cancelled. The property carrier of the certificate holder paid the claim and the subro action then followed.
The risk manager of the certificate holder testified that the insured would not have been allowed to come on the premises if the 8/7 date was known. The agent stated that the insured always paid the premium, that is why 12/31 was put in. The agent also stated that it would cost the agency $$ to reissue the certificate after the premium was paid.
The agent and their E&O carrier settled with certificate holder property carrier far in excess of what it would have cost to reissue the certificate.
This is a bit of a "sticky wicket." When you have the authority from the E&O broker to issue the certs, you also have some additional responsibilities. The ability to issue certs is a value-added proposition to our customers, but may add legal responsibilities for the agent. Be careful that you are acting within the scope of your authority.
If the brokerage agreement authorizes you to issue certificates, then I would presume you can do so...assuming the carrier acquiesces as well. You might ask for confirmation from the wholesaler that they have the authority to delegate this on behalf of the carrier. Some/many E&S carriers won't grant this authority due to the nature of the business they're writing.
Regarding notice of cancellation. A certificate is a snapshot in time, so you should provide the information that is accurate at that point in time. As for providing notice of cancellation, the certificate should not include any such notice unless it is a right by contract (i.e., the policy). I'm not aware of any ISO additional insured endorsements that grant 30 days notice to an AI for cancellation.
Since almost all state laws permit just 10 days notice of cancellation for certain reasons (e.g., nonpayment), why would greater notice be given to a certificate holder than the named insured? It is a BAD idea to agree to provide 30 days notice of cancellation when that's not possible. You're just asking to be sued.
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"One of our companies doesn't want us to send them copies of the certificate of liability insurance. My question is two part:
"1) The certificate of liability form states the "issuing INSURER will endeavor...how can the agency be held responsible for notification for what is stated clearly the carrier's responsibility?
"2) If the company doesn't want a copy of the certificate, why should the agency start notifying certificate holders?
"Should agencies assume the responsibility of what is the carrier's duty? Does the agency have a legal exposure? If yes, then how do you suggest agencies respond?
Here are some thoughts from the VU faculty:
The short answer is that the agency should continue to send the certs to the carrier. Even if they say they don't want them, send them anyway. The agency is NOT obligated to send notice of cancellation UNLESS they have altered the "endeavor to" wording on the certificate. Advise the insurance company that your internal procedures, as well as your E&O carrier, require that you send a copy of each certificate issued and that they insurer should NOT return them to your office.
Even though some insurers do not want copies of certificates, some agents are still sending them. Others are complying with insurer requests by not sending them but keeping a log. When the certificate says the insurer will endeavor to send notice, rest assured no notice will be sent. The exception is when the policy is endorsed with a list of certificate holders who will be given notice. It is up to the insurer to issue the notices. Agents should not get involved in doing the insurer's work.
If notice is not sent and the certificate holder was harmed by the failure to do so, the insurer and its agent are likely to be sued. The best defense, however, is to show that the agent complied with the insurer's directive. Do not send certificates, keep a log and do nothing further. There is nothing to prevent an agent from being sued. But documenting what you do is the best defense from having to pay any damages. Above all, the agent should not notify the certificate holders because that is the insurer's obligation.
First, remember that anyone can sue and the first important part of any liability policy is defense coverage. This could add up to more than your agency's E&O retention.
Second, can you see this in court? The agent issued a Certificate of Insurance to a holder that states that the insurer will endeavor to mail, all the time certain that the insurer never endeavors to mail. Some would think that is a fraudulent act. The insurer states that they did not issue the certificate and does not receive copies of the Certificates. So they state they are not responsible for the agent's actions.
Your best defense is to send out notices of intent to cancel to Certificate holders. It is also the best collection method for nonpayment cancellations.
1) The certificate of liability form states the "issuing INSURER will endeavor...." How can the agency be held responsible for notification for what is stated clearly the carrier's responsibility?
The carrier has the authority to delegate this function to the agency. If that's the case, then the agency incurs the risk of failing to notify. I just got a directive from a major regional carrier recently with the huge headline "Great News." It told its agency force that they no longer wanted copies of certificates and that it was the agency's responsibility to provide notice of cancellation.
Also, it's possible for an agency to indicate that cancellation notice will be provided when the policy grants no such right of cancellation. In cases like this, the agency would be exposed to a lawsuit.
2) If the company doesn't want a copy of the certificate why should the agency start notifying certificate holders? Should agencies assume the responsibility of what is the carriers duty?
We just had a teleconference on this and related issues last week. Our E&O carrier and attorney participating in the call advised, regardless of the carrier's directive, that certificates should be copied to the insurer. You're right...the certificate says that the insurer, not the agent, will endeavor to provide notice of cancellation. Without a copy of the certificate, that would be impossible and issuance of the certificate would appear to be a sham. In a court hearing, how would it look if the plaintiff's attorney accuses the carrier and agency of fraud or dishonesty for making a claim they clearly had no intention of compying with?
In general, since the parties to the contract are insurer and insured, agencies should NOT be sending out cancellations to anyone. If it's absolutely necessary, then EVERYONE should be getting such notices. Agencies should insist on hold harmless agreements with carriers who do not intend to comply with certificate provisions that they will endeavor to provide notice of cancellation.
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"When small contractors request certificates for the general contractor, I give them extra copies of their declarations page to give to the general or I fax to the general a copy of the declarations page. What do you think of this practice? Small contractors have a bad habit of not paying premiums."
Here are some thoughts from the VU faculty:
If it satisfies the general, it's a service but it is not a Certificate...it is a copy of a declarations page that tells the contractor very little. You are not, however, providing the service for which you are being paid.
I do not like the idea. The certificate just shows that the policy is in force at the time the certificate was issued. A “contract copy holder” might be able to argue a larger case that this was a copy of a valid contract and thus granted coverage even if the insured had cancelled or been cancelled. I think you are giving too much.
It is a bad idea. Contractors frequently hand out copies of their declarations pages after the policies have been canceled. I would limit certificates to the requested party. If someone requests a copy of a declarations page or certified copy of a policy, send it to the requesting party and place a date of transmittal on the document.
I think this is a pitiful practice and any GC should reject attempts to avoid providing information that is contractually required.
I am surprised people requesting certificates would accept just a copy of the declarations page. As long as it works, I think it is fine. The problem comes up when someone refuses it and wants the certificate. What do you do about insurance specifications on contracts your insured signs? But perhaps your insureds never sign contracts.
As long as the general contractors accept the declarations rather than certificates, it appears okay. Does the declarations page confirm whether an additional insured endorsement applies?
I don't know that there's anything inherently wrong with it as long as the GC will accept it and it's OK with the insured. However, to me there is information on a Dec. page I wouldn't want, as an insured, a certificate holder to know about.
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"At an agency meeting this week, we discussed your white paper. We had a lively and interesting discussion afterwards and a question arose which I wanted to run by you and the experts. When we issue a Cert showing products and completed operations coverage in the current policy year and the insured either goes out of business or goes bare, do we have an ethical responsibility to notify prior certificate holders of the non-existence of continued products and completed operations coverage? Or should we assume the certificate holders will understand this coverage's features in such circumstances? If transparency and disclosure is the goal, where or when does it end?"
Unless the contract between your insured and the certificate holder calls for keeping P/CO coverages in place for "X" numbers of years after the contract or projected expires, there's no need to provide notice of any kind that I can think of. Any mention of P/CO coverage on the certificate of insurance is for the one policy year shown on the certificate. There is no continuing obligation after the expiration date of the policies shown on the certificate.
The E&O carrier would almost certainly prefer that agents minimize contact with other parties regarding cancellation or dropped coverages or, at a minimum, be consistent in how all such insureds or other parties are contacted. The greater the expectations created in the minds of others, the possibly greater exposure the agency has for an E&O claim based on detrimental reliance or some other noncontractual legal claim.
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"With regard to Certificates of Liability Insurance, how do you feel about listing the physical damage coverage on a liability certificate?"
Why would a certificate holder want to know if someone has physical damage on their own auto? Why would they care? Comp and collision are not liability coverages, so the ACORD 25 is not appropriate. You don't use the Certificate of Liability insurance to show any property coverage....auto or otherwise. If you want to provide proof of auto coverages (Both liability and physical damage) use the ACORD 23 - Automobile Certificate of Insurance.
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"My question pertains to issuing a certificate of insurance for the 'Risk Management' type of accounts where there is often a large SIR (or deductible) on the primary GL and there is no provision on the COI form to address that. For example, if a client is self-insured up to $500,000 where there is a $1,000,000 limit excess a $500,000 SIR, we would show the carrier writing the $1,000,000 limit in the GL section with $1,000,000 in limits. There isn't a requirement to indicate an SIR on the COI. So the question is, especially where there are no third party requirements that address the SIR issue, does the COI then need to show the SIR? We are looking for some guidance for standard practices. (I have read through the Certificate White Paper on the website, and it is full of good information, but I didn't see this particular question addressed.)"
Here are some thoughts from the VU faculty:
Legally (not that I'm an attorney) you are not obligated to disclose any such SIR where there is no 3rd party requirement to do so. Just another of the many areas in which the current certificate form is woefully inadequate.
It would be very prudent to show the SIR amount, since it is a significant factor with regard to liability insurance. Based on the number of disputes that have arisen over SIRs and when not declared, you might be avoiding a dispute in the first place by declaring it.
In my opinion, COI’s are loaded with danger for insureds with large retentions. There is seldom a good risk administration program in place and the COI does not mean a lot in the first place. There have been many instances where insured’s have paid claims out of their pocket due to poor risk administration practices and certificates of insurance. YOUR insured needs to have a good control strategy to make sure coverage is in place if you are going to depend on ANOTHER to give you your contractual risk management strategy. You, or your insured need to be the ones in control. With the COI strategy you are not.
My guess is that the certificate holder would like to know this, but I'm not aware of any requirement in the ACORD Forms Instruction Guide that mandates showing it. Talk to your insured and see if full disclosure is desired to avoid any "surprises" at claim time.
When there are no third party requirements, I would ask the insured if they agree you should show the SIR. It is the insured's information and they should be able to determine how much information should be released. When there is a third party requirement, I think it must be shown.
If, for example, a contract requires a $1,000,000 CGL limit, the implication is that the other party expects the insured to have $1,000,000 worth of insurance coverage. A $1,000,000 policy limit with a $500K SIR is NOT a million bucks worth of insurance coverage and I believe implying that the insured has that amount of coverage is a misrepresentation.
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"The ACORD certificate has a section in the WC area that says to “check block if any proprietor/partner/exec officer or member has excluded coverage.” I have never been asked this question, but what liability does the agent incur if they ignore this block and don’t check the policy to see if excluded or included? Shouldn’t this be part of an agency's certificate procedures?"
Depending on the state, sole proprietors and partners are usually automatically excluded from WC but may elect coverage, while officers are automatically covered but may elect NOT to be covered...LLC members are all over the board as to electing in/out.
I usually tell people to do what the ACORD Forms Instruction Guide says. The certificate is silent as to directions, but mentions them on the ACORD WC application:
INDIVIDUALS INCLUDED/EXCLUDED
Based on state laws, certain positions within an organization, such as sole proprietors and partners, may not be covered by the applicable workers' compensation law, and may elect to be brought under such law. Conversely, executive officers of corporations are usually considered to be employees, but may elect to be excluded from coverage. Refer to the NCCI or applicable state workers' compensation manual for specific state details. Since the inclusion or exclusion affects coverage and premium, this section must be fully completed.
I would think a certificate holder would want to know this since their insurance might pick up, e.g., an uninsured officer, though state law might require them to elect completely of the law under any policy. I think the bottom line is to follow the ACORD form questions to the letter.
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"A self-insured $1,000,000 trucking company is a qualified selfiinsured on their primary auto liability policy and all claims are self administered… basically they are their own “insurance carrier for the primary layers.” The excess layers are structured in different ways...corridors, quota shares, self-insured limit on the automobile liability section of the certificate. Can we even issue an ACORD certificate? If Yes, how do we show coverage for the primary layer? How do we show additional insureds on the primary layer?"
Here are some thoughts from the VU faculty:
No -- they are self-insured so at best you can show proof of insurance subject to a $1 million SIR. You can only say what is true -- if the form doesn't work for you don't use it
If you are handling the excess coverages, you can identify those if requested, showing the SIR, but you can’t represent that there is any primary insurance if there isn’t. You must issue the certificate to reflect the insurance coverage – if the insured trucking company has a $1 million self-insured retention, than the Certificate should reflect such retention.
You need an agreement with the Self Insured entity as to how their program is to be communicated as evidence of insurance and entities added as Additional Insureds. The excess program can be presented on an ACORD certificate, with proper description of the primary.
Tell the trucking company to issue the certificate themselves, with their signature. Why put the burden on you?
There are too many unknowns here. How is the self-insurance program structured and what role does the agency play? There are a lot of unanswered questions here and many of them are legal or regulatory.
If the certificate holder is requesting evidence of primary insurance and there isn’t any, how can you issue a certificate indicating such? You issue certificates on insurance policies as a representative of the “issuing insurer.” If there is no policy, no insurer, and you’re not an agent or administrator for the self insurance, how can you issue a certificate?
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"Scenario: GL policy with $1,000,000/$1,000,000 limits issued 01/01/07 to 01/01/08. Certificate issued on 3/1/07 to certificate holder. On 6/1/07 insured calls and requests to lower his limits to $300,000/$300,000. On 7/1/07 a contractor calls and requests a certificate on my insured for work that he had done in April 2007. Insured also requests certificate for work being done now. How do I issue these certificates and do I have a responsibility to advise the 3/1/07 certificate holder of the change?"
This is a tough question and I'm not sure there is a "right" answer. Check out the musings of the VU faculty below for a consensus:
The certificate of insurance certifies limits as of the date the certificate is issued. The certificate indicates that limits may be reduced in the future. From April to June 1, the insured had $1,000,000/$1,000,000 limits, after that he had $300,000. For the certificate issued in July for the April job, you can only certify the higher limits from the inception date of the policy (1-1) until the limits were changed on June 1. However, you show an annual policy period on the certificate. This means you are certifying the higher limits for the entire policy year.
You should send the certificate holder a letter advising that the insured reduced his limits on 6-1. If the April job required higher limits than $300,000, the insured only had the higher limits for two months. This could be a problem if the certificate holder required higher limits to extend beyond 6-1. If the contractor signed a contract requiring higher limits for a job, especially for completed operations, then you need to send the prior certificate holders a revised certificate showing changed limits. It was probably a bad idea for the insured to reduce limits mid-term. You might want to ask the carrier how they want the certificates issued.
There is no easy answer. It depends on when the occurrence happens(ed). If someone is making a claim for an occurrence that happened before the change, they have one limit…for occurrences after the change, they have another limit. I’d think you’d need to tell them both. I would definitely not imply that there are limits higher than there might actually be. If anything, the certificate is a snapshot of the policy at the time the certificate is issued and if you had to choose, it would be the limits at that time.
Since the certificate shows an annual period, you need to reflect the change. I would suggest two separate certificates to show each limit in its own time period.
A certificate, when issued, must be a true representation of the policy at the time it is issued. Any certificates you issued prior to 3/1/07 can have the higher limit. Anything issued after the change must reflect the new, lower limits. If you're issuing a certificate today, even if it's for something that was done previously, it must show the lower (current) limits. You're not responsible to let any certificate holders know that the limit was lowered...as long as the certificate, when you issued it, properly stated what the limit was at the time. A certificate is a "snapshot"...it is not a representation that coverage will exist in the future, or at what limit.
I believe you have an ethical if not legal responsibility to make clear to the certificate holder the change in limits.
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"I have umbrella with an inception of 8-1-07 and expiration of 8-1-08. I started with a $3 million limit. On 12-28-07, I increased the limit to $6 million. On certificates processed from 12-28-07 forward when I show the umbrella and $6 million limit, do I use dates 8-1-07 to 8-1-08 or 12-28-07 to 8-1-08. Am I paranoid???? If anything bad can happen, it will happen to me. Since a certificate is just a snapshot I do not know. I really did enjoy your webinar on certificates of insurance."
This is another one of those complex, but common, situations where there may be no 100% "best" solution. Below are some thoughts on this from the VU faculty.
That's correct, it's a snapshot and as such it must be an accurate reflection of each policy on the date it is issued. The policy dates, in your case, are unchanged so you should leave the annual term. You can put the increase in limit and the effective date in the remarks section. However, keep in mind you probably don't even need to put the umbrella on at all for the majority of certificate holders if the limit they are requesting is provided by your primary policies.
Since the certificate is just a snapshot, you should show the new limits and the full policy term. As of the moment you issued the certificate, the insured did have the higher limits.
It depends on how the limits apply. Do they apply retroactively to the policy inception or is it a mid term increase? Ask the underwriter for his or her recommendations on how to show it to avoid potential claims for misrepresentation.
Unfortunately, I don’t think there is a clear, definitive answer to this. I can see an argument for showing just the limits in force at the time of the certificate. On the other hand, if there is a claim for an occurrence that took place during the portion of the policy where the limits were less than they are now, the certificate holder might feel misled, particularly given this wording on the ACORD form:
“THE POLICIES OF INSURANCE LISTED BELOW HAVE BEEN ISSUED TO THE INSURED NAMED ABOVE FOR THE POLICY PERIOD INDICATED.”
The policies listed below include an indication of the limits. The statement above implies that those limits were in force “for the policy period indicated.” While I don’t like adding any extraneous or unnecessary wording on an ACORD form, I’d be inclined to represent the true picture of coverage by showing the difference in limits.
On the other hand, who is the certificate requestor? If it’s a new job for a contractor, for example, then it wouldn’t be possible for there to have been an occurrence under the prior lower limits. Also, what does the contract require in the way of limits? If your insured is only required to provide $1MM, it probably doesn’t make much difference. If required to provide $5MM, it might.
My suggestion would be to ask your E&O carrier what they recommend, if not the umbrella carrier too.
It’s accepted in the industry that a certificate is nothing more than a snapshot of basic coverages and limits at the time it is issued. However, if you read the ACORD form, you won’t see where it actually says that anywhere. Is it material to the certificate holder? I’d be inclined to show the limits in effect at the time of certificate issuance, but if the limits required by the certificate holder are greater than the old limits, they might want to know that.
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"Can we and should we add the words "as required by a written contract" when showing a party included as an additional insured because the general liability form states that additional insured status has to be required by a WRITTEN contract? Wouldn't this clearly state what the GL policy provides?"
Generally speaking, one should be wary about including any extraneous commentary on a certificate of insurance. Below are some thoughts from the VU faculty.
This is an important point. The trigger is for the insured to have a contract with the party requiring Additional Insured (AI) status. If a General Contractor has a contract to name the principal as AI, they may also have requirements for all subcontractors and sub-subcontractors to name the principal as AI as well. The subs and sub-subs need policy endorsements naming the principal since the Automatic AI forms won't respond.
It is good to add this important condition. Ask the insurer what language to use and refer to the specific endorsement number and attach a copy so all parties are on notice of the written contract requirement. It might say additional insured status is triggered by a written contract provision per endorsement XYZ attached.
If you quote the wording from the policy or endorsement that states the party is an additional insured only if required by a written contract or agreement, that should work. But you need to use the same words as used by the policy or endorsement.
I would suggest you include a copy of the Additional Insured endorsement with the Certificate of Insurance in lieu of quoting from the policy on the Certificate of Insurance.
I would recommend adding nothing to certificate and simply attaching a copy of the endorsement to it. Let them interpret the language themselves instead of excerpting it.
I would avoid adding extraneous language to the certificate or you’ll be asked in court why you didn’t cite all the other limitations in the policy. Simply attach a copy of the endorsement if that’s necessary.
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"A local women's non-profit organization (Quilt Club) has called us regarding the property owner needing a COI. They currently do not have any insurance. They meet at the local community center one day a month for 2 hours and sew on a quilt. Each member brings their own machine. The community center is requiring liability coverage or they will not be able to use the space. Are we correct in our understanding that the members of the Club are not covered under the contract for any injury to themselves? Since no one else enters the premises other than the members, the policy would only be to satisfy the request for COI."
There are a number of issues here, but for the purposes of this page, we'll focus on the certificate of insurance issues. Here are some observations from the VU faculty:
The club should have a CGL with the CG 20 02 "Additional Insured - Club Members" endorsement attached. This would give the club and its members third party liability. There would be coverage if one member injured another member. The Separation of Insureds condition (aka, cross liability) would provide individual coverage for each member even for injuries to other club members.
I'm sure the club members also have coverage under their individual homeowners policies but I don't think these individual policies would satisfy the certificate holder. More and more churches and community centers are requiring certificates for groups who use the facilities.
The policy is to protect the owner and the group for any liability that they might incur to property of others or bodily injury to others while they are in, on or about the premises. Since they are moving machines in and out of the premises and since any one member could hurt another I can understand why the property owner wants a certificate proving they are insured.
I guess that this is a good idea—what if one of the silver haired ladies negligently leaves a quilting needle in a chair and some other guest later sits on it (my preference would be the risk manager for the community center who dreamed up the need for a COI—well one can dream. :-) Since this is a "community center," I'd assume it is owned by the taxpayers and, if I were the group, I'd complain to the management that this is a crazy idea
Typically, community quilts are made for an organization to raise funds for a charity, historical society or something similar. If the sponsoring organization has coverage, they could be included as volunteers. Have the quilters see if the organization sponsoring the quilt they are working on has insurance.
If that doesn't work, suggest they affiliate with a church or other community service organization that has coverage.
I assume that the agency is contemplating getting some kind of general liability policy for the club. That, in turn, would involve assuming that the club is at least to some extent formally organized, probably as an unincorporated association, so that it could be sued for liability. If it is and could be sued, then I believe a general liability policy would cover liability to third parties (such as the owner of the community center if the club negligently caused a fire) and also to the members themselves.
The question was not asked, but this seems like an onerous requirement in view of the very limited use of the premises involved. The community center might as well ask for a certificate evidencing homeowners' liability coverage from every individual who uses the premises.
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"What options do I have and/or what is the correct answer(s) when a commercial insured asks for a certificate with a blank certificate holder? What issues do I face if I send them one? I have typically sent one marked "client copy" or "example copy" but one client is pushing for a blank copy. I can say no but want to have some ideas of reasoning and how to back it up."
Our North Carolina association put on a certificate seminar they called "Certificates of Insurance or How I Got A Job In The Prison Laundry." Not that what YOU'RE doing is fraudulent, but doing what an insured requests for something like this could lead to undesireable consequences. Let's see what the VU faculty have to say....
Say no. That is your only option. If you give them a blank certificate you might as well give notice to your E&O insurer since you are giving your client the right to commit fraud.
You should avoid providing a Certificate of Insurance to your policyholder that leaves the Certificate Holder blank to allow the policyholder to fill it in. While it may be commonly done (I have seen the Certificate with the Certificate Holder as “To Whom It May Concern”), this approach is not the intended use of the ACORD Certificate as, among other issues, a Certificate is to be issued by an authorized representative (which the policyholder is not) and provides information that insurance is in effect at the time the Certificate was issued, which may not be the case if the policyholder is completing and sending out the Certificate.
The reason they are asking for a "blank" seem obvious...they want to be able to issue them to anyone they wish. We are advising our clients to retain a copy of any certificate they issue in their system, so you will have a "snapshot" of anything you issued. That way, you would know if the client altered your certificate. Sad to say we need to add this extra step, but the truth is, people are altering the certificates we issue. The certificate holder should be indicated on every certificate the agency issues...there are no "blanks."
The only reason they want it must be to issue their own certificates. I would tell them the insurer does not allow you to send blank certificates. All you have to do to be truthful with them is ask your carriers.
Giving an insured a blank certificate is like giving them a blank check that can be copied and issued repeatedly. Policy provisions may change and an issued certificate is supposed to be a snapshot of coverages at the time of issuance. If the insured is issuing copies of certificates during the policy period (and perhaps afterwards), then it is quite possible that the certificate will not adequately reflect the policy. Also, there can't be an "authorized signature" if it's a copy. Tell the client that each certificate must be authorized and issuing a blank certificate doesn't meet that requirement.
Doesn't Minnesota require the filing of certificates of insurance? If so, then ACORD has filed the certificate and only an authorized representative of the insurance company can issue the certificate. If your insured plans on issuing their own certificates to others, they can't be an authorized representative if the insurer if they're not a licensed agent with agency authority.
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"We often have contractors who do lots of small jobs and have to bid on them. They want a "Sample Certificate" to carry with them. (It’s a completed certificate except for their name.) If we were to type "Sample" in the Certificate Holder space and then stamp or imprint "SAMPLE" diagonally across the entire certificate, both pages, would we jeopardize our E&O? In the event that they actually get the job, we would issue a certificate to client with their name in the certificate holder's position."
This is similar to the "blank certificate" question with a slightly different twist. Below are some additional thoughts from the VU faculty.
Yes it could jeopardize your E&O if someone sues claiming they relied on the information. Even though you did not know that plaintiff specifically relied on it, you know the intent is for someone to rely on it for some reason.
Agents are often asked to provide a "bid" certificate. Issuing one with no certificate holder shown is a dangerous practice, but you seem to be doing this judiciously. For your protection, however, I would advise that you retain a copy of this "sample" certificate, exactly as issued by your office. That may mean printing one out and scanning it back into your system.
I've seen small contractors waving COI's that were dog eared and out of date - or the coverage had been canceled. If the contractor needs a sample COI they can use a copy of a COI recently issued to another party. That takes the agent out of any possible misrepresentation.
You’re asking for trouble. Read the VU white paper on certificates and you’ll find an example of what some insureds will do.
I can think of no legitimate business reason why an insured would need a document of this type from you.
Someone might represent the word “sample.” You won’t find this kind of certificate completion in the ACORD Forms Instruction Guide. It’s a recipe for disaster. Check with your insurers…my guess is they won’t authorize it and you can use that as your excuse.
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"I wanted to find out if we should state on a certificate of insurance the excluded officers on the workers' compensation. We have never done this before, however I had a certificate holder call me and state that the excluded officer got hurt on the job. He does not have medical coverage currently. This particular certificate holder stated that if they would have known the owner/officer was excluded from coverage, they would have never hired him to do the job. Can we get your opinion?"
Great question that can be answered by another question: What does the ACORD Form Instruction Guide say? Better yet, what do the VU faculty say? Check it out:
The Certificate includes this notation for the very reason that the certificate holder brought this issue to your attention – if you know that the executives have chosen to exclude themselves from Workers’ Compensation, the Certificate should show that fact. Put another way, the Certificate of Insurance should accurately reflect the insurance in effect (or not in effect) at the time of issuance.
What an excellent example of yet another "hole" created by certificates of insurance. Several thoughts: I don't know if it would be wise to indicate excluded officers without the consent of those officers. The motives for exclusion can vary and those individuals may not wish others to know that they aren't covered, the issue being one of privacy. It also is not be the role of the agent to cite every possible gap in coverage to a certificate holder. If they ask a specific question, then a response, maybe not on the certificate, but a response might be appropriate, such as if a particular endorsement is attached to the policy. In short, I vote no.
What is the purpose of a COI? To accurately represent coverage under the policy.
Excluded officers, partners and sole proprietors often sue property owners for job related injuries arising out of the work sites. If they have signed an indemnity agreement, their claim may be covered under the Additional Insured component of the contractor's CGL policy. If there isn't an indemnity agreement, the principal's CGL gets to defend the claim.
This is a material coverage element - particularly for small contractors where officers, partners or sole proprietors are working on the site. The election to reject coverage should be noted in the COI.
The form itself asks if sole props, partners, or officers are excluded. It states, “If yes, describe under special provisions below.” There's your answer. For the sake of consistency, follow the ACORD FIG.
The ACORD form allows for indicating excluded employees. I would submit this question to your E&O carrier for an opinion.
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"We attach a separate government cancellation clause to our certificates for the government. We black out the cancellation clause on the Accord 25. (SEE ATTACHED) Based on what we understood on the certificate teleconference, we can't do this anymore, but the government will not accept the certificate without it being blacked out. Any thoughts?"
Government entities make some of the most onerous certificate demands of contractors and vendors. The reason is they can (or think they can). You may need the assistance of your insurance department. Here are some suggestions from the VU faculty:
There are two issues here. One, I agree with the recommendation that you not alter the certificate wording by striking out anything but instead leave the days space blank or put "0." The endorsement does what it does and should satisfy the government's requirement. Which leads to the second issue - why is the government (US, state, local?) asking for the strike-out when they insisted upon the endorsement that changes the contract the way they want? Perhaps those insisting on it could be reminded by your commissioner of insurance that the certificate doesn't really DO anything to the insurance policy.
Short of the insurer agreeing to honor the required wording, the ACORD 25 should not be altered. I am aware of carriers that will issue manuscript endorsements to honor unique cancellation requirements.
Attaching a “government cancellation clause” to the certificate doesn’t modify the policy. Is this an endorsement actually being added to the policy by the insurer? If so, the certificate should be referred to the carrier for processing.
My understanding of the new Kansas law is that certificates have to be filed with the insurance department. If that’s the case, I doubt you can modify a certificate without refiling it. Here is what was published in the VU newsletter:
KAIA’s Senate Bill 271 has been signed into law by the Governor. The bill requires certificates of insurance forms be filed and approved by the Kansas Insurance Department. For the benefit of agents, statutory language will state that a certificate cannot be used to modify, alter or amend an insurance policy. The bill allows standard setting organizations like ACORD to file their forms as industry standards and that is anticipated. One unanticipated question is what impact the bill will have on “certificates” of coverage that are issued under master policies. Those actually convey coverage to the insured who is added to the master policy and they were not intended to be covered by this act.
Here is the actual statutory language:
KSA 40-955(b)
Certificate of insurance forms must be filed with the commissioner of insurance and approved prior to use. Notwithstanding the ‘‘large risk’’ filing exemption in subsection (j), a certificate of insurance cannot be used to modify, alter or amend the insurance policy it describes. The certificate of insurance shall contain the following or similar language: The certificate of insurance neither affirmatively nor negatively amends, extends or alters the coverage afforded by the policies listed thereon. An industry standard setting organization may be authorized by the commissioner of insurance to file certificate of insurance forms on behalf of authorized insurers.
Kansas now has a law requiring the filing of certificates. You can tell the government agency that it would be a violation of state law for you to issue an unfiled certificate, then direct them to the commissioner's office.
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"Some of our clients are currently in the assigned risk/state fund for their workers' compensation coverage. We understand that we do not have the specific authority to issue certificates of insurance for these policies and that official certificates are available from the state fund or assigned risk carrier but their turnaround time can be extremely slow. Would it be a legitimate practice for our agency to issue a certificate showing this work comp coverage with a disclaimer stating that the information contained in the certificate is for information purposes only and that the state fund/assigned risk carrier should be contacted for an official certificate? Or is there a better practice we should adopt?"
Certificates are issued by agents on behalf of insurers. The account may not even be assigned yet. Even if it is, you can't issue a document with an "authorized signature" without authority. Your question is essentially a legal or regulatory one. If the ARP rules do not allow you to issue a certificate, you can’t issue one of any kind. All certificates are for information only and that’s clearly stated on the ACORD form…you shouldn’t add any other kinds of “disclaimers.” If you are experiencing service problems in the issuance of certificates, I’d take that up with your plan administrator, insurance department, or state association.
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"When issuing a Certificate of Insurance when the holder has requested the wording "endeavor to" be X'd out, I know it is not legal to do so in the state of Kentucky. When the project is for the Federal Government and they are requesting the wording be changed, do they overrule the state law and are we then permitted to do so?"
Your question is basically a legal one requiring a legal answer. That means getting an opinion from an attorney or your state insurance department. We can give you some opinions, but they obviously carry no legal weight. Here are some VU faculty thoughts:
No, a federal bureaucrat does not "trump" state law. Refer the requestor to the Insurance Department.
Some carriers will issue endorsements (I have been told) agreeing to notify certain parties of cancellation of a policy. Short of the carrier doing that, the "endeavor" word should not be removed.
No. The insurer must issue an endorsement to the insurance policy stating that it will give the requested notice to the Federal Agency. You can then provide the agency a copy of that endorsement.
Review your agency/company agreement and related documents. Chance are it allows you to issue only “standard and unaltered” (or similar language) certificates. Refer certificates like this to the insurer.
Federal employees and agencies usually cannot violate state laws. Provide a copy of KY statute KRS 304.14-120 and ask your insurance department for backup.
An increasing number of insurance departments are forbidding modifying the "endeavor to" cancellation wording. One (NY) even says the certificate can't address cancelllation unless the certificate holder is entitled to notice of cancellation under the policy. Some proprietary carrier AI endorsements may grant notice of cancellation to an AI, but none of the ISO AI forms do.
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