Certificates of Insurance
Robin Federici, CPCU, AAI, ARM, AINS, AIS, CPIW
Certificate of Insurance
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
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.
THREE MAJOR PROBLEMS
1. Fraud by agents & insureds – certifying
coverage that does not exist
2. Onerous contractual requirements – that can
not be met by coverage typically available in
the marketplace
3. Cancellation notice issues – not sending a
cancellation notice to the certificate holder as
indicated on the certificate
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”
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
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 . . .
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 inhouse qualifications, expertise, and experience to
do so.
 Other agencies do this for competitive reasons to
avoid losing an account.
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
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.”
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!
Primary & Non-Contributory
ISO forms – the Issue of “non-contributory”
 What is it?
 The definition of the term would determine
coverage
SPECIAL ISSUES
 Primary & Non-Contributory:
 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.
ISO CGL
“OTHER INSURANCE” PROVISION
4. Other Insurance.
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.
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
ISO CGL
“OTHER INSURANCE” PROVISION
c.
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.
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.
Primary & Non-Contributory
Commercial auto
Commercial auto primacy is governed by:
– Ownership
– ISO's symboling system
– Along with various and diverse state
laws
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.
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!
– 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.
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
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
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
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
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
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
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
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.
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
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
Risk Management Issues
 What does your organization do?
 Do you have formal, written certificate
procedures?
 Is there quality control to ensure compliance?
Robin Federici, CPCU, AAI, ARM, AINS,
AIS, CPIW
QUESTIONS?