Coverage Corner

CERTIFICATE OF INSURANCE RESOLUTIONS

By Cathy Trischan

New Year’s Day is a time for resolutions, with many undertaking to exercise regularly, save money, and spend more time with family and friends. Why not make a few resolutions involving, what has become for many, one of the most frustrating aspects of being an insurance agent – issuing certificates of insurance? Let’s resolve to do the following in 2024!

GET THE INSTRUCTIONS

The most commonly issued certificates of insurance are created by the Association for Cooperative Operations Research and Development (ACORD). ACORD publishes a Forms Instruction Guide (FIG) for each certificate it creates. The FIG can give helpful advice when faced with a decision about how to complete a particular form.

USE THE RIGHT TOOL FOR THE JOB

ACORD has a library of forms, each with a particular purpose. For example, the Certificate of Liability Insurance (ACORD 25) should be used only to provide information on liability coverages. For property coverage, ACORD has a separate form, the Certificate of Property Insurance (ACORD 24). And if the requestor is a mortgagee or loss payee, one of the Evidence of Property Insurance forms (ACORD 27 or ACORD 28) is the better choice. Always use the most current edition of the ACORD form, and do not complete non-ACORD certificates without first checking with your insurance carrier.

MAKE SURE THE INFORMATION IS ACCURATE

Confirm that any information included on a certificate of insurance is accurate. Usually, certificates are created by importing information from policies in the agency’s management system. This information may have been manually entered or downloaded from the insurance carrier. While importing policy data is a timesaver, it is important to double check the information before the certificate is finalized. Errors can and do happen and need to be corrected before the certificate is issued.

JUST THE FACTS

Resist the urge to paraphrase, describe, or explain policy coverage. It is far better to attach a copy of an additional insured endorsement, for example, than to attempt to explain on the certificate how the endorsement functions. Agents are regularly asked to include language that confirms the coverage meets the requirements of a contract or that coverage applies in a certain way. Push back on these requests, and let the policy language speak for itself.

NOTICE OF CANCELLATION

Under most commercial insurance policies, only the first named insured will receive notice of cancellation. There are a few exceptions, but in most cases, additional interests are not entitled to such notice. Unless a notice of cancellation endorsement is part of the policy, an agent should not state on the certificate that notice of cancellation will be provided. Remember, too, that if notice of cancellation is to be sent, that responsibility rests with the insurer, not with the agent. Many agents take it upon themselves to notify parties of cancellation which increases their errors and omissions exposure.

STATE CERTIFICATE OF INSURANCE REGULATIONS

Understand the certificate of insurance regulations in the states where you and your clients do business. Many states have statutes and/or bulletins from Insurance Departments regarding what can and cannot be done on a certificate. Many laws apply to any certificate issued for property or operations in the state. Knowing the certificate law of your home state is not enough.

Some states’ rules are general, stating, for example, that one cannot use a certificate to change policy terms. Others are stricter, prohibiting, for example, any summary of policy language that varies from the precise and complete language of the policy. Many laws, and the corresponding fines, apply to those who request certificates that violate a state’s rules. Having a copy of the law or bulletin to show the requestor can be helpful. IA&B has created sample letters for member agents to use in challenging certain requests. Visit IABforME.com/certificates-of-insurance to access them.

AGENCY PROCEDURES

Develop and enforce agency procedures regarding certificates of insurance. Everyone in the agency should be doing things the same way. In some agencies, account managers issue certificates, while in others there may be a certificate department. Still other agencies contract with third party vendors to issue certificates. Regardless of who is issuing the document, make sure that person understands enough to know what is acceptable and where to turn for help when faced with a request that seems improper.

Certificates of insurance are a challenge for most agencies. Resolving to do things the right way, though, is a first step toward helping employees through the process and helping the agency minimize its errors and omissions exposure.

Til next time!

Cathy Trischan, CPCU, CRM, CIC, ARM, AU, AAI, CRIS, MLIS, TRIP is IA&B’s commercial lines education consultant. She works with our CIC and CISR programs, as well as our live CE webinars. Catch her at one of our upcoming courses: IABforME.com/education