One of the most time-consuming and labor-intensive functions in any agency is the handling of certificates of insurance. This is also an area that creates a number of E&O concerns.
Although a certificate confers no rights upon the certificate holder, agents often alter the certificate at the request of either the insured or the certificate holder, creating a liability in the process.
This is one of the most difficult areas for many agencies to handle. The agent is often caught between the desire to serve the client and the need to adhere to the carrier’s requirements. Certificate holders often request special wording or unique forms as evidence of insurance and there is almost always a time constraint on certificate issuance.
The best advice, of course, is to always use ACORD certificates and not alter the wording. In reality, however, the certificate holder will often require modifications in order to allow the client to work. This dilemma must be resolved in a way that minimizes E&O exposures while allowing the client to maintain business relationships.
When in doubt, always obtain the carrier’s approval to issue any nonstandard certificate.
When asked to provide evidence of insurance, be sure to use the proper form. ACORD has several different types of certificates and each contains different wording. Be sure to check the ACORD Forms Instruction Guide for information regarding the proper use of the forms.
One of the most frequent errors agents commit with regard to certificates is showing the certificate holder as an additional insured when they are not. Simply indicating that a firm or organization is included as an additional insured on a certificate is not sufficient. The appropriate endorsement must be attached to the policy.
Some companies allow the use of “blanket” additional insured endorsements, eliminating the need to endorse each additional insured. This usually requires that the agency provide a list of certificate holders on a regular basis. This approach creates another E&O exposure, however, because such endorsements usually require a written contract between the insured and the certificate holder, and the written contract must require the insured to name the certificate holder as an additional insured. If there is no written contract, or the written contract doesn't require additional insured status, then the blanket additional insured endorsement is not "triggered" and the certificated holder is not an additional insured.
Another frequent error is indicating on the certificate that the certificate holder will be furnished a notice of cancellation. The insurance policy itself says that only the first named insured (and sometimes lienholders) will receive notice of cancellation. If the certificate holder insists on receiving a notice, the policy must be endorsed.
Many insurance companies tell their agents not to send copies of certificates issued on their policies. How can an insurance company endeavor to send a notice of cancellation to a certificate holder if it doesn’t have a copy of the certificate? Always mail copies of certificates to the insurance company, whether they want you to or not. If the company underwriter wants to throw them away, that’s their business.
When a policy is canceled, the agency should attempt to verify that the company has sent a notice to all certificate holders. If it has not, then for the sake of courtesy as well as E&O loss control, send a letter to the certificate holders to advise them that the policy has been canceled. (Note: this applies only if the policy is truly canceled and not expected to be reinstated; don’t feel obligated to notify certificate holders every time the premium finance company sends out a notice of intent to cancel.)
For more information on E&O exposures with certificates of insurance, see:
Following Up on Certificates of Insurance (from IIABA’s Virtual University)
Managing Commercial Lines E&O Exposures (from IIABA’s Virtual University)
Additional Insureds and Certificates (from IIABA’s Virtual University)
Reviewing Contracts for Insureds
Best Practices for Certificates of Insurance
In This Section:
Best Practices Ideas for Handling Certificates
The Best Practices for Avoiding E&O Claims When Handling Certificates of Insurance
- DON’T alter the wording on the ACORD certificate of insurance (See E&O Tip #1)
- Use the proper ACORD form (proper edition date, Certificate, Evidence of Property Insurance, etc.) Always send Page 2 of the certificate – it contains an important disclosure and disclaimer.
- Don’t issue non-ACORD certificates without approval from the insurer
- Stay within the authority granted under your agency agreement (See E&O Tip #2)
- Document who requested the certificate and what was requested
- When the certificate wants to be added as an additional insured, immediately request the proper endorsement from the company
- Comply with the company’s requests for a listing of certificates issued or additional insureds added when operating under a blanket additional insured endorsement
- Add special wording to a certificate when the policy includes blanket additional insured and/or blanket waiver of subrogation endorsements (see Sample Wording)
- Don’t make any statements on the certificate without first contacting the insurer to request an endorsement to reflect the coverage being requested
- If a client wants you to review a contract to determine insurance requirements, be sure the person doing the review is qualified. See "Reviewing Contracts for Insureds" for more information and a sample disclaimer form for the client's signature.
- When a policy is canceled, verify that the company will send notice to all certificate holders. If not, send a letter to certificate holders to advise them that the policy has been canceled.
- Require CSRs and Producers to use a checklist when processing a request for a certificate
- Don't issue or sign certificates for policies placed through alternative markets - request directly from the wholesaler, unless the wholesaler has given the agency specific written authority to do so
- Don't issue or sign certificates placed through surplus lines carriers, under any circumstances, unless you have a surplus lines license
- Establish a written procedure for handling certificates of insurance (See Sample Procedures)