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Certificate of Insurance Questions and Answers

Author: VU Faculty

Certificates of insurance account for more headaches at the agency level than just about any other issue. Because COIs create so much angst, the VU regularly conducts webinars regarding them. Out of these webinars comes questions. In this article we attempt to answer many of these questions.

Q. Once you have reviewed the request and executed the COI, how do you suggest that you advise your insured on what can and cannot be done with regard to the insurance requirements held within the specific contract.

A. The only sections of the contract on which you can consult are the insurance requirements. When you get a contract to review (hopefully before it's signed), you schedule a meeting with your insured to lay out what is in the contract and what can and cannot be done from an insurance standpoint. Some requirements can be met by endorsement, some can't regardless what you do. Your job is to explain to the insured what is available and let them make the business decision.

Q. Can you please discuss the Policy vs Per Project vs Per Location check boxes on the GL section of the certificate?

A. The policy aggregate is the standard policy aggregates based on the coverage. Per Project and Per Location aggregates are triggered by attachment of endorsements. If the CG 25 03 (Designated Construction Projects General Aggregate Limit) is attached, the general aggregate applies per listed project; some carriers use a “blanket" description (i.e. “All construction projects undertaken by the named insured"). This endorsement is an ongoing operations limits endorsement.

If the CG 25 04 (Designated Locations General Aggregate Limit) is attached, the general aggregate limit applies to each insured location. These are locations owned by, leased or rented to the insured, not locations at which the insured is working. This endorsement is a premises liability endorsement.

Q. If a policy is pending cancellation due to non-payment, but the certificate is requested before the cancellation date - should you still issue the certificate while in pending status?

A. Technically, you can because a COI is a snapshot of coverage in effect on that day. But technical allowance aside, I think this creates a distinct problem for you on a couple fronts. First, do you call the insured to discuss the pending cancellation? If you do, you may have created another problem for the agency if you don't call all insureds with pending cancellation. Second, if you issue a COI without a warning to the holder, are you guilty of creating a detrimental reliance. Because the COI is a representation of the policy in effect on the date it is issued; it seems acceptable and even required to note in the Description of Operations that cancellation is pending effective MM/DD/YY.

Q. If an insured has a Blanket Additional Insured Endorsement, do we still need to send the company the certificate holder's information to list them on the policy as an Addition Insured?

A. Remember, there isn't a “Blanket" additional insured endorsement; ISO promulgated two “Automatic" additional insured endorsements (CG 20 33 and CG 20 38). That being said, if the party being requesting additional insured status is included in the grant of protection offered by the automatic endorsement, no, you shouldn't need to send the information to the carrier. However, some additional insureds want to “see their name in lights" and asked to be specifically listed. If this is the case, use the CG 20 10 (or proprietary equivalent) and specifically list that AI, if the underwriter understands the reason and then allows it.

Keep the key difference between these forms in mind. The CG 20 33 requires privity of contract. Only the party on page one of the contract is granted additional insured status. Conversely, the CG 20 38 grants additional insured status to any party required by the contract to be extended additional insured status.

Q. How should we cancel a COI?

A. COIs don't have to be cancelled because they are snapshots of coverage on the day the COI is issued. However, if you have made it a regular practice of issuing “updated" COIs when a policy cancels, you have to continue that practice and issue a new COI with updated information (but only if you have set this expectation historically). If you haven't done this in the past, don't start.

Q. What Accord version should be used. Our management system, Applied TAM, allows for three different options. Should the newest version always be used? Some like the wording of the older versions and think we should use them. What's your opinion and why?

A. That's an interesting question, but more from the point that some folks prefer the older versions. I guess my question in response to your question is why the older version is preferred by some.

In looking at the changes to the ACORD 25 over the last few editions, it seems to me each change has been for the benefit of the agent. The most current version, to me, does the best job explaining the intent and purpose of the COI. I would be interested to hear the dissenting opinions; maybe that would be fodder for a second class.

And lastly, some states don't allow the use of an older form when a new one is filed and approved. Check with your state to see if you have options for using older forms.

  In regard to eroding aggregate limits, what do you recommend for open claim reserves?

A. Claim reserves are just estimations made by the adjuster. Basically, for COI purposes, ignore them. Nothing has been paid and thus no limits have been reduced.

We are beginning to receive requests/requirements from certificate management companies for copies of the insurance declaration page and even the entire policy. This does not seem like a request with which we should comply. This seems to border on breach of client confidentiality. What do you think?

A.  You ask a great question. Because the release of an entire policy may potentially violate privacy laws, you have to get the insured's permission. I would recommend that permission be obtained in writing and kept in the file.

In regard to what you tell the certificate company, you have to explain to them that the policy is actually not your information to give. Remember, the policy is a contract between the insured and the insurance carrier – the agency is not a party to the contract. Only the insured can give permission to provide the policy.

Last updated: June 12, 2020

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