For years—recently with increasing frequency—agents have been asked by third parties to issue certificates of insurance that include information beyond (and potentially inconsistent with) the terms of the policy of insurance represented by the certificate. These requests present a myriad of potential E&O problems for agents.
Traditionally, these requests typically have come from governmental entities, contractors, financial institutions and others who are additional insureds, certificate holders, or are otherwise interested in the coverage being provided under the relevant policy. Although certificates of insurance are not forms
requiring OCI approval, the IIAW and others have consistently advised against modifying certificate forms, e.g., ACORD or ISO forms, as well as attempting to summarize complex cancellation provisions, exclusions or other terms within the confines of certificates of insurance.
In 2008, with the IIAW’s support, the Wisconsin Commissioner of Insurance issued a bulletin to all property and casualty insurers and agents regarding the use of certificates of insurance. At that time, the IIAW and OCI were confident that the bulletin would be helpful in stemming inappropriate requests to agents related to certificates of insurance, and that it would also protect agents by both educating them and deterring misconduct.
In 2011, the IIAW, again, engaged OCI on this issue out of concerns the bulletin was ineffective. As a result, language was added to statute that “no intermediary may provide a misleading certificate of insurance”. This modification allowed OCI to pursue sanctions or remedies for violating this section of the statute. IIAW Legal Counsel Josh Johanningmeier said in a 2011 memo, “The amendment to Section 628.34 is essentially a codification of the OCI’s 2008 bulletin, but serves as a stern reminder to agents that acceding to third party requests for certificates of insurance that deviate from industry standard forms or go beyond an accurate summary of the policy may have dire consequences”.
At that time, the IIAW and OCI were again confident that the bulletin, combined with the small statutory change, would be helpful in stemming inappropriate requests to agents related to certificates of insurance, and that it would also protect agents by both educating them and deterring misconduct. Despite the OCI’s clear direction regarding certificates of insurance, inappropriate requests continue to mount.
As a result, the IIAW will pursue legislative action similar to what has been enacted in states such as Delaware, Indiana, Massachusetts, New Jersey, Ohio and Rhode Island. This legislative effort lead by the IIAW will seek to avoid opposition from financial institutions and contractors while working with the Professional Insurance Agents, National Association of Insurance and Financial Advisers and the Wisconsin Insurance Alliance.
Essentially, the legislation will prohibit a person from the following:
(1) Prepare, issue, or request or require the issuance of a certificate of insurance that contains any false or misleading information concerning the policy of insurance referenced in the certificate of insurance.
(2) Prepare, issue, or request or require the issuance of a certificate of insurance that purports to affirmatively or negatively alter, amend, or extend the coverage provided by the policy of insurance referenced in the certificate of insurance.
(3) Alter or modify a certificate of insurance after issuance.
In addition, the commissioner of insurance will have the power to enforce the statute by a variety of mechanisms/actions available under Wisconsin law.
When similar legislation has passed in other states, the IIA state associations developed template letters that agents could use when they received a request for an improper certificate. The notice informs the requester that there is a state law that prohibits the issuance of a certificate of insurance that does not reflect the underlying policy, and it points out that anyone requesting such a certificate is also breaking the law and may result in a forfeiture.
We’ve found that the combination of a certificate statute and the use of such a template letter eliminates many of these requests and ends the back-and-forth between agents and third parties that previously occurred. If our legislative efforts in Wisconsin prevail, the IIAW will draft a similar document for our members to use.
Perhaps a third time’s a charm and we will for once and for all put this issue behind us!Share on LinkedIn