Handling Certificates of Insurance? What Can Go Wrong?

Improper handling of certificates of insurance (COIs) can often lead to E&O litigation. In fact, 6%-8% of E&O claims each year deal with COIs.

What can you do? Establish set written procedures to ensure the proper handling and execution of certificates.

KEY ISSUES AND COMMON QUESTIONS INCLUDE:

Is it OK to provide “sample” certificates to clients that state For Information Only? It’s not clear why agents handle certificates in this manner, but it is not a good practice. ACORD guidelines/instructions on certificates require that, at all times, the “Certificate Holder” box must be filled in with the name and address of the person/entity that requested it.

Can anyone sign a certificate? As stated on the certificate form, the signature on the COI is that of an authorized representative of the insurer. Authorization comes from the insurer since the agent is issuing on the insurer’s behalf. The person signing the form must be authorized by the carrier. Authorization can be written or in the form of an appointment with the carrier. The person signing the certificate must be licensed in the state where the named insured is domiciled and in the state for which they are providing coverage confirmation.

The carrier is non-admitted. Can we still issue a certificate? Technically, no – because the retail agent is not the agent of record. When dealing with wholesalers to place non-admitted business, certificates need to be executed by the wholesaler as the wholesaler is technically the agent of record. If an agency wants to issue certificates involving E&S business, the agency should secure written authorization from the wholesaler that makes it clear what the expectations are of each party.

What’s one of the biggest problem areas with certificates? One of the biggest problem areas is agencies checking the Additional Insured box when that coverage is, in theory, not part of the coverage. Additional Insured status affects how a claim would be handled, so without this coverage, agents are technically misrepresenting the coverage. Blanket Additional Insured does not mean that everyone is covered as there are conditions that will need to be met. Ensure that staff responsible for evaluating and approving requests for Additional Insured status is trained on the topic.

We heard that we should have the carriers issue the certificates. Is this a good suggestion? It’s a good suggestion if you can find carriers willing to do it as most believe this is an agency obligation. It was always strongly suggested to send the certificates to the carriers, but it’s unknown what the carriers would do with them.

The client has a $5 million Umbrella, but the contract only calls for them to have $1 million. What limit should be shown? Show the full limit, even if the client only wants the $1 million shown. Failure to do so could expose your agency to allegations of providing an incorrect certificate.

From time to time, we are asked to use a non-ACORD form. Is this a problem? It can be. Before completing the certificate, provide it to the carrier and ask for their approval. If they don’t approve the use of the non-ACORD form, it is probably best to not use it.

When it comes to certificates of insurance, ensure that they’re your friend, not your foe.