DON’S DISCUSSION: CERTIFICATES OF INSURANCE

Are you a member with a question? Contact IA&B Legal & Corporate Affairs Director Don Bankus to find the answer at 800-998-9644, ext. 603 or DonB@IABforME.com.

QUESTION:

My commercial insured has a $3 million limit on an umbrella policy but wants me to show only a $1 million limit on a certificate of insurance. Is there anything wrong with that?

ANSWER:

Certificates of Insurance – the gift that keeps on giving! The short and sweet answer is that a producer with actual knowledge of applicable coverages should always accurately reflect the correct and full limits of the umbrella policy, as well as every other component of other coverages on the Certificate of Insurance (COI).

WHAT’S THE BIG DEAL?

Even if it may seem harmless or unimportant, the big deal is that purposely entering information, which the producer knows to be false:

▲ Likely violates applicable insurance statutes, rules, and regulations;

▲ Subjects the licensed producer – and the agency for whom he or she is providing services – to lawsuits for negligence, fraud, and/or misrepresentation (up to 15% of all E&O claims are COI related);

▲ Could be a violation of your ACORD licensing agreement; and

▲ Subjects the licensed producer – and the agency – to potential administrative penalties, including substantive fines and possible license suspension or revocation.

STATUTES, REGULATIONS, AND BULLETINS

Delaware and Maryland have statutes which, among other things, expressly address COI-related issues. Each state’s statute provides that it’s unlawful for anyone (think: your customer or the certificate holder) to request or require a producer to issue a COI that contains false or misleading information, and it’s also unlawful for anyone (think: producer or anyone providing services for the agency) to prepare or issue a COI that contains false or misleading information. Delaware also has a separate statute whereby such acts would constitute insurance fraud, which subjects licensees to additional penalty.

In addition, both the Pennsylvania Insurance Department and the Maryland Insurance Administration have issued bulletins which express the respective department’s position that issuing a false or misleading COI is prohibited and subjects licensees to a multitude of possible repercussions.

THE BOTTOM LINE

Extreme caution is urged when including information on a COI that a licensee knows is not accurate. Explain to the insured that doing so is illegal or impermissible on a number of fronts, and, in the event of a claim, accurate policy limits will be revealed to a certificate holder anyway.

This document is not a legal opinion and should not be relied upon as such. The intent of this document is to provide a general background regarding the topic or topics discussed, not to provide legal advice. Producers and agencies should consult an attorney regarding specific situations and specific questions with respect to the topic or topics covered in this document. Neither the Insurance Agents & Brokers nor any of its employees shall be responsible for any errors or omissions regarding any statements made in this document, nor any errors or omissions regarding any statutes, regulations, court rules, and/or any other government documents cited in this document.