Change is good….. right? It depends… With the new Certificate of Insurance I believe the change is good, it might just take some effort and time to get everyone else satisfied with it.
Any discussion about Certificates of Insurance (ACORD 25) Certificate of Liability Insurance needs to point out what a certificate of insurance is and what it is not.
- Merely evidence of the policies issued and in force at the time the certificate is issued.
- A “snapshot” in time.
- To be viewed as a summarized informational reflection of an insurance policy.
- Governed by state insurance regulation.
It does not:
- Provide assurance that the certificate holder will be notified if the policy is modified, expires, is extended or cancels.
- Extend or alter coverage provided by an insurance policy.
- Convey rights or privileges.
- Add additional insured status to the certificate holder. That can only be done via the policy or endorsement.
So what happened when ACORD revised the certificate (ACORD 25) of insurance in September of 2009? Two of the main areas are the removal of the words “endeavor to” in the cancelation portion of the certificate. They also removed the blank where the number of days notice of cancellation was and changed the wording to: “Should any of the above described policies be cancelled before the expiration date thereof notice will be delivered in accordance with the policy provisions”.
Well…. This all sounds good so far, right? The problem will be in getting the requestors of certificate to deal with this change. You may get certificates of insurance rejected because it does not meet their contract requirements. This becomes even more crucial when the contractor can not get paid until this is resolved. This can put you on “the wrong side” of your client and damage your relationship with them. How can this be avoided? 1. You can spend time informing your clients of the new forms and let them know they need to discuss this with the contract holder up front so that it does not become an issue at payment time. You can also become intimately aware of what the requirements or regulations are in the state of the risk. Most states say you can not amend the policies by means of a certificate. The policy must be issued or amended to reflect the requirements. If there is an additional insured status being added to the policy then the policy must be endorsed to reflect that. If long or different cancellation provisions are being added then the policy must be amended to meet those provisions. If a waiver of subrogation is needed then it must be added to the policy. Many requestors of certificates have not updated their contract insurance provisions in years. Time spent with them working to get them in line with current policies and regulations will be well spent and alleviate future problems.
What if you are asked to issue a certificate on the “old form”? DON’T do it! The licensing agreement with ACORD (through your agency management vendor) allows you to ONLY use the most current ACORD forms. They give a “breaking in period” of one year from the change to get it implemented and after that you will be in violation of the licensing agreement. This could result in litigation and penalties/fines. In 11 states the ACORD certificate forms are filed with the insurance department and using anything but the current form could result in a regulatory violation. This violation could result in a Class 1 misdemeanor offense.
So if the new certificates are properly implemented, then is should reduce E&O exposure and help you to not lose sleep over the change. With most states implementing certificates of insurance regulation/procedure it will help back the agent when they are asked to “go to the dark side” and make wording changes or add additional wording to a certificate. If it is not in the policy then it can not be on the certificate. If you live by this statement alone you will be sleep easier.