Questions and Answers on the Law and Rules Regulating Certificates of Insurance

Original answers prepared 11.18.2011 

Last update prepared 12.01.2017

NOTE: The answers have been provided by the IIAT technical staff based on our interpretation of the law and rules and the opinions expressed in Best Practices for Certificates of Insurance. Refer to that publication for more details regarding the law and recommended procedures for handling certificates. It is not intended as, and cannot be treated as legal advice.

Why can't we just discontinue issuing certificates and have the insurance carrier be the sole issuer of Certificates of Insurance?

Most insurance companies transferred this responsibility to their agents to save money and most agents accepted the task as a way to provide prompt service to their policyholders. It is doubtful that companies will take the responsibility back.


What about the issuance of the 101 form with a certificate with any additional information requested?

The ACORD 101 (Additional Remarks Schedule) can be used to supplement information provided on the certificate. SB 425 does not specifically address or prohibit additional remarks added to the certificate in the Description box. However, the law does provide general guidelines for the additional remarks, and the TDI rules clarify the law with regard to information that may be contained in a filed certificate of insurance or required when requesting a certificate of insurance. In any case, such remarks should not alter, amend or extend coverage provided by the policies, contain false or misleading information, or contain a reference to a legal or insurance requirement in a contract other than the underlying contract of insurance.


Most policies have a lot of endorsements. Will all endorsements need to be placed on the certificate?

We don't recommend attaching all endorsements to the certificate. It's OK to attach endorsements if the certificate holder requests them, or if you know the policies aren't satisfying the certificate holder's requirements in some way because of the endorsements.


Can we show Job Numbers and Job Names in the description box?

No. A Job Number should be included in the Certificate Holder section of the form.


Can we reference "if required by written contract" in the description box?

SB 425 prohibits reference to a legal or insurance requirement contained in a contract other than the underlying contract of insurance. We recommend using the sample wording for blanket additional insured and waiver of subrogation endorsements as shown in Exhibits #4 and #10 in the Best Practices publication.


If SB 425 is based on the Location of the job, why isn't the job location required on the certificate? Many certificates are issued to "main office" which could be in a state other than Texas.

The law applies to operations in Texas, regardless of the location or mailing address of the certificate holder. It is designed to make out of state contractors subject to the same requirements as Texas contractors.


If we ask our underwriter to endorse waiver of subrogation and our underwriter emails back it has been approved and they are adding can we issue the certificate or do we wait for the endorsement?

If the underwriter has bound the coverage it can go on the certificate.


How does this law apply to a Texas agent who is insuring foreign or out of state assets or activities?

It will have no effect on out of state operations. The certificate laws of those states would take precedence.


Is it acceptable to put " Refer to policy for all coverages, conditions, and exclusions?"

That really isn't necessary. The ACORD certificate contains appropriate wording. Custom certificates are required by SB 425 to contain similar wording.


Does this mean that we should no longer list the blanket or specific additional insured or waiver endorsements that are on the policy?

You can list endorsement numbers (including edition dates) on the certificate or attach copies of the endorsements to the certificate.


What about the insured who has already signed the contract and demands the certificate include information not part of the policy? EX: Primary Non Contributory Wording...I see the penalty against the certificate holder and/or agency but what about the insured?

Generally, the insured is requesting the wording to comply with the actual contract provisions. We focused on certificate holders who are making demands, but the same rules would apply to your insured.


Why not just provide the policy coverage forms along with the Certificate of Insurance to the certificate holder?

An excellent idea, if your customer agrees and the certificate holder will accept them. But the information on the certificate must still be accurate.


How will we know what certificates have been approved by the TDI?

A list of approved certificates is available in the Certificates Insurance Section of the TDI website.


We are sometimes asked to complete a letter stating that insurance is in place and providing policy numbers. Is that considered a "certificate?"

Yes, and therefore the letter (or the template for the letter) must be approved by TDI before it can be used and it must meet the other requirements for a certificate. Under SB 425, a certificate of insurance is defined to include a document (including an electronic record) that is executed by an insurer or agent and issued to a third party as a statement or summary of property or casualty insurance coverage. The term doesn't include an insurance binder or policy form.


What about certificate forms that the state issues to show insurance (i.e. pest control, plumbers, etc.)?

There is no exception in the law for a public entity. They must file their certificates for TDI approval.


If policy includes Blanket Additional Insured wording or endorsement, will we be able to provide this info on the certificate?

Yes. The Best Practices publication recommends that you not check the additional insured box but add wording to the certificate indicating the blanket endorsement is attached. Sample wording is provided in Exhibit #4 in the publication.


There are cases when a subcontractor has already finished a job and now the general contractor is asking for a certificate with non compliant wording. What should we do?

The law and the rules apply to certificates issued at any time, even after the job is complete. For what it's worth, we have seen court decisions in other states forcing general contractors to pay the subcontractor in these situations.


Can we file a complaint against the certificate holder?

Yes. Agents and policyholders can file complaints regarding noncompliant certificates with the Texas Department of Insurance. See page 8 of the Best Practices publication for addresses and requirements.


Does the new law apply to property certificates?

The new law does not apply to a lender requesting evidence of insurance but would apply to any other entity that requested a property certificate.


What if the insurance company specifically tells you not to use the blanket additional insured wording that is shown in the Best Practices publication?

You should follow your company's instructions regarding certificates issued on their behalf. If the company offers some other wording to put on the certificate, be sure it complies with the law.


What is the turn around time on reviewing the complaint?

There is no specific review time in the law.


When our policyholders send us wording in contracts that reflect the coverage not available such as broad form property damage, blanket contractual etc., how do we address with the client? Aren't contracts addressed specifically by the new law also?

Obviously, if you can't put requested language on the certificate, your first call should be to your policyholder to explain why. Exhibit #14 on page 51 of the Best Practices publication has sample wording intended for the certificate holder. This can be modified slightly for a written notice to the policyholder. The law does not prevent a certificate holder from requesting specific coverages or wording on the certificate, but it does address what you put on the certificate.


Can we show endorsements on the certificate?

You can list endorsement numbers (including edition dates) on the certificate or attach copies of the endorsements to the certificate.


Who can issue certificates?

See the detailed explanation on page 57 of the Best Practices publication.


Our agency issues many certificates through ISNET. How will this be impacted by the new law?

If it's a system whereby you enter policy information and that information is furnished to a third party, then the system has to be approved by TDI.


If the contract calls for XYZ company to be an additional insured on ABC company's CGL policy and the policy has a blanket additional insured endorsement, what wording can we use on the certificate?

We like the sample wording in Exhibit #4 on page 39 of the Best Practices book, because it's purposefully vague. Mainly, it doesn't make the for-sure statement that XYZ company IS an additional insured. The main thing is you want it to be as close to the words of the endorsement as possible, or even verbatim.


While you stated the new procedures discussed would be applicable to jobs in Texas, I have insured's through out the U.S. and issue certificates for operations from New York to Nevada. Is there a source available that consolidates the various state regulations for certificates?

Yes, see the Certificates Resource Center on our website and you'll find a link to the IIABA Virtual University "complete list of state laws and regulations."


We are repeatedly told to issue certificates with lower umbrella limits than the policy provides. Would this be a violation of the law?

In our opinion, the certificate should accurately reflect the limits shown on the policy declarations. The law says the certificate must not alter, amend or extend the coverage or terms and conditions provided by the policy. And the law says a person (including the policyholder) may not require issuance of a certificate that contains false or misleading information.


Can we use the terms "blanket contractual" or "broad form property damage" on the certificate when the certificate holder asks for it?

No. There is no coverage available that uses these terms. A certificate holder cannot require an agent or insurer to certify insurance coverage that is not available.


Can we certify that the CGL policy covers the indemnity obligations in the insured's contract with the certificate holder?

No. Courts can't even agree from one case to another whether the contractual liability coverage on a CGL policy applies to certain contractual obligations. Don't put yourself in the position of guaranteeing that the CGL coverage applies to all such obligations.

 

Questions?
Contact Regina.

Regina_cropped
Regina Anderson
P&C Resources Specialist
512.493.2416
rande@iiat.org