1. Certificates of Insurance
Robin Federici, CPCU, AAI, ARM, AINS, AIS, CPIW
Certificate of Insurance

2. Introduction What is(n’t) a certificate of insurance?
Informational snapshot only – Allan D. Windt
A certificate cannot modify a policy – Black’s Law Dictionary
Generally courts have agreed that a certificate is not a contract – there was no consideration by the certificate holder

3. What Have the Courts Said?
Courts, countrywide, generally hold that a certificate holder has no legal recourse against an agency or insurer.
The reasoning – basic contract law - no consideration has been made on the part of the certificate holder so, therefore, no contract exists.

4. THREE MAJOR PROBLEMS
Fraud by agents & insureds – certifying coverage that does not exist
Onerous contractual requirements – that can not be met by coverage typically available in the marketplace
Cancellation notice issues – not sending a cancellation notice to the certificate holder as indicated on the certificate

5. SPECIAL ISSUES Refuse to issue . . .
The choice is yours and your carriers
No contractual requirement, under the policy, to issue a certificate
Refuse to make “implied coverage modifications” on the certificate
Never issue “blank” or “To whom it may Concern”

6. SPECIAL ISSUES Excess & Surplus Lines . . .
The wholesale agent must issue certificates
If they have authority to allow the retail agent to issue they may grant the issuance of certificates to the retail agent
Retail agent should receive instructions, in writing, otherwise

7. SPECIAL ISSUES Sending Certificates to Carriers . . .
Some agents have determined it is in their best interest
Other agents are instead keeping a log of certificates issued
BTW - The “old” certificate indicated that the “issuing insurer will endeavor to notify . . .

8. SPECIAL ISSUES Reading Contracts:
It is not uncommon for insureds to ask agents to review the insurance requirements in contracts in order to advise what types of insurance are needed to comply with these contractual requirements.
Some agencies do this because they have the in-house qualifications, expertise, and experience to do so.
Other agencies do this for competitive reasons to avoid losing an account.

9. SPECIAL ISSUES Reading Contracts:
From a practical standpoint, many agencies feel that the depth of review of such contracts is a business decision made by the agency.
From an E&O standpoint, the recommendation is for the insured or prospect to have their own legal counsel proficient in contract law review these contracts, then inform the agent what exposures need addressing from an insurance standpoint

10. SPECIAL ISSUES Primary & Non-Contributory:
The ACORD FIG states that the Description field should be used appropriately:
“As used here, records information necessary to identify the operations, locations and vehicles for which the certificate was issued.”

11. SPECIAL ISSUES Primary & Non-Contributory:
“Primary and noncontributory” has nothing to do with operations, locations, or vehicles
REMINDER: COIs are certifying the policy coverage in place at the time of issuance NOT quoting language found in contracts our insured’s sign!

12. Primary & Non-Contributory
ISO forms – the Issue of “non-contributory”
What is it?
The definition of the term would determine coverage

13. SPECIAL ISSUES Primary & Non-Contributory: Problems can exist:
Insurance policies govern primacy of coverage, not certificates or construction contracts
Problems can exist:
if the other party purchases their own insurance and that coverage is also primary.
when the other party has been added as an additional insured on our insured’s CGL.

14. ISO CGL “OTHER INSURANCE” PROVISION
If other valid and collectible insurance is available to the insured for a loss we cover under Coverages A or B of this Coverage Part, our obligations are limited as follows:
a. Primary Insurance
This insurance is primary except when Paragraph b. below applies. If this insurance is primary, our obligations are not affected unless any of the other insurance is also primary. Then, we will share with all that other insurance by the method described in Paragraph c. below.

15. ISO CGL “OTHER INSURANCE” PROVISION
b. Excess Insurance
(1) This insurance is excess over . . .
(b) Any other primary insurance available to you covering liability for damages arising out of the premises or operations, or the products and completed operations, for which you have been added as an additional insured

16. ISO CGL “OTHER INSURANCE” PROVISION
Method of Sharing
If all of the other insurance permits contribution by equal shares, we will follow this method also. Under this approach each insurer contributes equal amounts
If any of the other insurance does not permit contribution by equal shares, we will contribute by limits. Under this method, each insurer’s share is based on the ratio of its applicable limit of insurance to the total applicable limits of insurance of all insurers.

17. Primary & Non-Contributory
UMBRELLA
If an umbrella policy is needed to meet the limits requirements, the umbrella policy’s “other insurance” provision would need to be reviewed since these contracts are non-standard.

18. Primary & Non-Contributory
Commercial auto
Commercial auto primacy is governed by:
Ownership
ISO's symboling system
Along with various and diverse state laws

19. Primary & Non-Contributory
WC:
The “primary and non-contributory” language should not be used since which WC policy responds is based on the state law in place
For the WC exposure, the non-contributory language would have no effect on benefits, since workers can only collect from their employer for covered WC claims.

20. SPECIAL ISSUES 2013 CGL - Endorsement
ISO is introducing an optional Primary and Noncontributory – Other Insurance Condition Endorsement CG 20 01
The endorsement revises the Other Insurance Condition
There are some “challenges” with the endorsement wording!

21. Primary And Noncontributory Insurance
Primary And Noncontributory – Other Insurance Condition Endorsement CG 20 01
The following is added to the Other Insurance Condition and supersedes any provision to the contrary:
Primary And Noncontributory Insurance
This insurance is primary to and will not seek contribution from any other insurance available to an additional insured under your policy provided that:
(1) The additional insured is a Named Insured under such other insurance; and
(2) You have agreed in writing in a contract or agreement that this insurance would be primary and would not seek contribution from any other insurance available to the additional insured.
Requested by CTAC
The requirement that the AI be a Named Insured on the other policy prevents the sub’s policy (to which this endorsement is attached) from being primary relative to other subs’ policies on which the AI is also added as an AI, thus preserving the right of equitable contribution from the other subs’ policies.
Note that this condition is only triggered if the P/NC requirement is in a written contract.

22. SPECIAL ISSUES Waiver of Subrogation:
Each insurance contract addresses the issue
Additional insured’s are insulated from carrier’s subrogation rights
There are no standard waivers of subrogation so the scope and breath may vary

23. SUBROGATION Policy Language: CGL – after the loss BAP – after the loss
NCCI WC – protect the rights
Commercial Property – in writing before & after the loss there are some limited parties that can be afforded a waiver

24. SPECIAL ISSUES Notice of Cancellation:
ISO AI endorsements do not amend the policy provisions
“First Named Insured” ONLY receive company generated notices
Other requests – non-renewal or material change are not extended to AIs
State Statues dictate the number of days notice
Consider OCP policies in lieu of AI endorsements
Carriers proprietary forms may comply with these requests

25. SPECIAL ISSUES CGL vs. AI:
Additional insured endorsements are not the same
The unendorsed CGL includes coverage under the Contractual Liability Exclusion – exception
Defense can be considered an issue – within the limits UNLESS the “Supplemental Payments” requirements are met

26. OTHER ISSUES CGL vs. AI: Endorsements can LIMIT the AI’s CGL coverage
Endorsements can ADD SPECIAL EXCLUSIONS that apply to the AI’s coverage

27. SPECIAL ISSUES COI vs. Policy Limits:
The certificate only includes an area to list limits
There is no mention of “minimum” or “actual limits”
ACORD instructions call for entering the policy limits

28. ACORD ACORD forms: Do not modify These are “copy written” forms
Some state require that an altered certificate must be filed and approved by the DOI before issuance
Increased E&O exposure
Breach of agency contract
Commercial Package - Common Policy Conditions

29. CHALLENGES
Uninsurable Requests – “any act…”, and “primary and noncontributory”
Illegal Requests – non-existent coverage, certificate modifications, and violations of state law
Inappropriate Requests – cancellation requests and non-ACORD certificates
Impractical Requests – unavailable or expensive coverage.

30. NON-ACORD CERTIFICATES
Most require that they are issued by “the insurer”
Language may be different from the standard ACORD Forms
Agents may not be authorized in their contracts to issue so they can not sign on-behalf of their carriers

31. State Issues
Due to the challenges associated with certificates of insurance, several insurance departments have either:
Posted “bulletins”
Required COIs to be filed
Instituted state statutes – NAIC Model Fraud Law

32. Risk Management Issues
What does your organization do?
Do you have formal, written certificate procedures?
Is there quality control to ensure compliance?

33. Robin Federici, CPCU, AAI, ARM, AINS, AIS, CPIW
QUESTIONS?