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ACORD Certificates of Insurance - What Certificate Holders and Providers Need to Know

The Certificate and Evidence of Insurance forms which ACORD made effective in late 2009/early 2010 have raised alarm among insurance certificate holders and therefore the insureds that has got to provide them. Unless insurers issue manuscript endorsements to their policies (which is unlikely), insurers not make any pledge that they're going to even plan to notify most certificate holders if the policies are cancelled. The new certificate forms have eliminated the reassurance that the insurer would "endeavor to mail __ days written notice to the certificate holder." They simply state that "...should any of the above described policies be cancelled before the expiration date thereof, notice are going to be delivered in accordance with the policy provisions."

What does that mean to certificate holders under standard insurance policies?

Liability and auto - albeit a certificate holder is a further insured, it'll not be notified if the policy is cancelled. Only the primary Named Insured are going to be notified.

Workers compensation - Certificate holders won't be notified of cancellation, since the policy requires the insurance firm to notify only the covered employer.

Property - Mortgagees and loss payees on standard property policies are going to be notified - 10 days before the insurer cancels for nonpayment, 30 days before it cancels for the other reason and 10 days before it nonrenews the policy (unless modified by state requirements). Other certificate holders, even additional insureds, won't be notified.

All policies - Certificate holders, even additional insureds, won't be notified if the insured itself cancels the policy.

How should insurance requirements in contracts be changed so as to respond?

Contract language requiring insurance certificates to state that "__ days notice of cancellation be given" and requiring that the "endeavor to" language within the certificate be deleted, is not any longer applicable. albeit changes are made to the certificate, ACORD has made it exceedingly clear that changes to the certificate don't change the policy.

The contract should require that the insured party provide immediate notice to the owner, lessor, etc. if the insured entity receives notice of cancellation or nonrenewal from its insurer. This provision is particularly important since many insurers won't be willing to suits the recommendations below, especially for smaller insureds. Unfortunately, this has the apparent drawback of counting on the very party who is non-performing to report the non-performance.

Contracts should require that the insured's policies be endorsed to satisfy the certificate holder's reasonable requirements. (However, as stated above, not all insurers are going to be willing to cooperate.) If the insurer is somewhat cooperative, it's going to be willing to extending an equivalent notification rights to the certificate holder that it gives to the primary Named Insured. Below is sample manuscript endorsement wording that might accomplish that end. Very large insureds could also be ready to obtain even broader notification rights.

"If we cancel or elect to not renew this policy, we'll give written notice to an in depth at the subsequent address __________________. we'll provide an equivalent notice of cancellation and nonrenewal that's required by this policy to the primary Named Insured."

So if the certificate holder is given an equivalent notice of cancellation and nonrenewal because the first Named Insured, what does that really mean with standard policies?

Standard commercial insurance policies provide the primary Named Insured with 10 days notice of cancellation for nonpayment of premium. If the insurer cancels mid-term for any reason besides non-payment of premium, commercial general liability, automobile and property policies provide 30 days notice of cancellation. Workers compensation policies, however, provide only 10 days notice of mid-term cancellation. If an insurer nonrenews a policy versus cancelling it mid-term, it's going to nonrenew a billboard automobile or workers compensation policy with none advance notice in the least . Property policies can also be nonrenewed with none advance notice to the insured, but if there's a mortgagee or loss payee on the policy, they need to tend a minimum of 10 days advance notice. General liability policies could also be nonrenewed with just 30 days notice.

State laws in most states change the above requirements, requiring more notice in many situations. as an example , Florida requires that carriers provide the primary Named Insured with 45 days notice of cancellation in some circumstances. The provisions of the various state laws are often complicated, differing not only by line of coverage but also by length of your time the policy has been effective , the precise reasons for the cancellation or nonrenewal, etc. the precise state requirements are often accessed through the IRMI Insurance Cancellation Guide published by the International Risk Management Institute.

The larger the insured client, the more likely that it'll be ready to obtain additional concessions from its insurer. If possible, those additional provisions should require:

Advance notice to the certificate holder albeit the insured initiates the cancellation or nonrenewal and
Minimum cancellation and nonrenewal provisions, no matter what's provided by the quality policies or various state laws.

Why not just require the old form?

You may ask, "Why doesn't the certificate holder simply require the insured and its insurance broker to supply the old certificate of insurance form?" What certificate holders and insureds should know is that if an agent does modify a typical certificate or signs a custom one that gives notice of cancellation, it's almost certainly doing so against the specific direction of the insurance firm . So while the certificate holder may have a paper in its hand which states that the insurance firm will provide notice of cancellation, the insurer won't stand behind it. If coverage is cancelled, all that the certificate holder has probably gained is that the right to sue the agent and its errors and omissions carrier. Since the agent is perhaps executing the modified certificate with the complete knowledge that it's not authorized to try to to so, coverage under its errors and omissions policy is suspect. For a fuller understanding of why an agent executing modified certificates is engaging during a practice which can be unauthorized, deceptive and potentially illegal, please see the article written by Bill Wilson of the Independent Insurance Agents and Brokers of America at http://www.iiaba.net/eprise/main/VU/NonMember/WilsonCancellationNotice.htm.

Vendor solutions

I am conscious of about 20 different vendors who provide some sort of insurance certificate and verification service. I even have found just one vendor that gives a certificate service that completely bypasses ACORD certificates and their problems. I expire their information as a service to readers. Their name is Ins-Cert Corporation, and knowledge on their services are often found by doing an online search thereunder name. Their system is Web-based and requires the agent/broker to comply with make a "good faith effort" to enter notices of cancellation into their system. The system then automatically sends cancellation notices to all or any certificate holders by email. Their system appears to supply an answer to both the matter of cancellation notices and also the matter of fraudulent ACORD certificates. From my investigation i think they provide a legitimate service and are deserve consideration. Readers of this paper who have found other workable solutions to the present problem are asked to contact me.

Why the "Good Ol' Days" Weren't Really So Good -

Certificate holders certainly wish that the insurance industry would find how to notify them when an policy is cancelled. But actually , they'll not have lost much during this change besides the illusion that the insurer would notify them.

Many insureds have a "blanket additional insured" endorsement on their liability policies. meaning that anyone that the insured agrees to call as a further insured during a contract is automatically as long as kedudukan* in its policy . But that also means the insurance firm doesn't obtain the names and addresses of these additional insureds, therefore the insurer doesn't know who they're or the way to notify them.

Certificate holders would reasonably assume that as a matter of excellent faith, insurers would require that the agents/brokers send them an inventory of all of the certificates that they issued in order that the insurer could "endeavor" to offer notice of cancellation. Incredibly, that's not the case. Many carriers have explicitly told the agents/brokers to not send them copies of the certificates.

Since many insurance carriers haven't made the great faith effort to suits the notice requirements of the old certificate forms, not much is lost by eliminating the notice requirements altogether. a minimum of false promises are not any longer being made.

Closing thought

In writing about these changes on its own Website ACORD explained that it had to vary its certificates because they often contradicted or expanded the duties contained within the underlying insurance policies. Unfortunately, they weren't ready to cooperate with the opposite players within the insurance industry (the insurance companies, ISO and NCCI) to craft an answer which solved that problem while also meeting the legitimate business need of certificate holders to receive a cancellation notice. The outcry from the businessmen may have to urge much louder before a far better solution to the present problem is reached.

The information presented here is necessarily general and isn't intended as legal advice.

Brent Winans, CPCU, ARM is VP of Risk Management Services for the Plastridge Agency in Delray Beach, FL. he's available to offer a humorous (Yes, humorous!) and informative presentation on this subject to interested audiences. He also provides assistance in drafting contemporary and achievable insurance and risk management language for contracts also as providing other fee based (no insurance sales) risk management services.

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