14 Feb Certificates – Not Harmless Documents
Each year, the handling (or mishandling) of Certificates of Insurance generates its fair share of problems, with many finding their way into E&O litigation. The last numbers I saw stated that 6%-8% of E&O claims deal with certificates.
Thus, it seems appropriate to give more attention to some of the issues and questions often posed to me, Angie, and Mishell during our annual reviews. During the E&O Quality Management Seminar last year, Mishell did an excellent job addressing this topic, but for everyone’s benefit, here are a few of the issues/questions often raised.
Question: “We may provide ‘sample’ certificates to clients labeled ‘For Information Only.’ I understand this is not a good practice. Why?”
I am unsure of the reason/need to do this. In speaking with my E&O colleagues, there was a consensus that issuing a certificate labeled “For Information Only” (or something similar) is not a good practice. For one, ACORD has issued very specific guidelines/instructions on certificates and requires that at all times, the certificate holder box must be filled in with the name and address of the person/entity that requested it. One agency asked about putting the name and address of the insured in that box. E&O Plus does not suggest either going with a “For Information Only” approach or putting the insured’s name in the certificate holder box.
Question: “Can any agency person sign a certificate?”
This question is very astute, as most E&O Plus agencies are looking at some of their procedures/practices to determine whether they are the right ones. The signature on the certificate of insurance 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 it can be in the form of an appointment with the carrier. It is important that the person signing the certificate be licensed in the state where the named insured is domiciled and in the state for which they are providing coverage confirmation.
Question: “Can the agency sign a certificate when the carrier is non-admitted?”
Technically no. These need to be executed by the wholesaler because they are 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 clarifies the expectations of each party.
Question: “The client has a $5 million umbrella, but the contract only calls for them to have $1 million. What limit should be shown?”
It is heavily suggested that the full $5 million limit be shown. Failure to do so could expose the agency to allegations of providing an incorrect certificate. Even if the client only wants the $1 million shown, it is suggested to show the full limits.
Certificates: Let’s ensure they are our friends, not our foes.