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Certificate vs. Policy Limits

Author: VU Faculty

Your insured contractor has gotten a job where the insurance requirements include at least $1,000,000 in CGL coverage. Your insured has a $2,000,000 CGL occurrence limit. He doesn't want them to know that he has this much insurance, so he asks you to issue the certificate showing a $1,000,000 limit, as required in the contract. So, what do you show on the certificate...$1,000,000 or $2,000,000?


The question above was posed as our June 2003 survey/poll. What was interesting was the fact that responders were split 50/50 as to which approach was most appropriate.

Because there was no consensus, we posed this question to our faculty and, guess what...they split exactly 50/50 as well! Below are some thoughts from our faculty, along with some feedback from ACORD.

But first, if you'd like to review the actual certificate language, here are two ACORD certificates:

  ACORD 24 – Certificate of Property Insurance
  ACORD 25-S – Certificate of Liability Insurance

Now, on with the debate....

Prepare the certificate to match the policy.

My vote goes to $1,000,000. I have no legal obligation to the certificate holder. The policy does provide a limit of $1,000,000 so it's not a misrepresentation.

I say $2,000,000. Although the certificate is only a snapshot and confers no rights to anyone for any reason, I believe is is still expected to represent an accurate picture of the policy(ies) in force. In my seminars, I always ask the question "how many lies can you tell before your are a liar?" We are all liars, but I don't think executing fraudulent documents is what is expected of professionals. Somehow this speaks to our integrity as ethical, moral and professional people. Yes, showing the true amount may encourage larger lawsuits or claims but that is hogwash. If it's that big a deal, $1,000,000 vs. $2,000,000 won't make a difference.

If the certificate doesn't say that the insured has "at least" $1 million or words to that effect, it could be viewed as misleading or maybe worse, i.e., an intentional misrepresentation or even fraud. Of course the degree of risk involved in depends on what the certificate holder does or doesn't do in reliance on what the certificate says, whether or not that action or inaction is reasonable, and perhaps whether or not it is foreseeable (which may amount to approximately the same thing as what is reasonable).

What if he goes out and buys another million of coverage for himself, which he would not have bought if the certificate disclosed $2 million already in existence. He has arguably been legally harmed to the extent of the cost of the extra million. To use an extreme example, what if that extra cost is the straw that breaks his financial back, and his business goes under?

So, for purposes of a vote, I would vote for $2 million.

But I have a lot of sympathy for the argument that, as a business matter, the insured should not disclose limits that the contract doesn't require him to have or to disclose. So a solution might be that, when the contract is drafted in the first place, it should call for a certificate that shows that the insured has "at least" the limit or limits required. Then the agent can issue a certificate that says just that.

Not $1,000,000. To do so would be fraud.

The certificate of liability insurance should be prepared to exactly match the underlying policy. Period.

Some clients show umbrella limits on certificates that are lower than the actual policy limits. The practice does not actually affect the policy. While it is an incorrect certificate, there is actually more coverage than what is shown. I have not seen that as a problem, so far. Maybe some of the others responding will have known of some adverse result.

I don't understand the reason for doing so, but I don't believe it would make any difference since the cert confers no rights or privileges to the holder anyway. It might make a difference if the holder was named as an additional insured on the policy. In that case, the agent would be falsifying a document and the A.I. has a right to a copy of the policy anyway.

I just did an in-house E&O seminar for a very large agency and they do this on a regular basis, IF the requestor asks for limits that are LESS than the actual policy limit. Example: the requestor wants a $1,000,000/occurrence limit but policy actually has a $2,000,000/occurrence limit, they only show $1 mil.

You should only indicate the limits of insurance required by the certificate holder.

In my humble opinion, if a client asks for a certificate on a policy, and there is an umbrella, we so not suggest showing the umbrella unless asked.

If a client requests a certain limit of liability, we only show the limit asked for and no more.

If a client is asking for a certificate to meet a regulatory requirement, it is customary to show the statutory or other regulatory requirement.

If an auto ID card is issued it is customary in the limits section to write "meets statutory minimum."

As a matter of practice, I would be hesitant to show a limit higher than you have to as it just becomes a target. I surmise the agent has been asked for a certificate in the amount of $1,000,000. If that is the case I would only show what is required by the client.

My guess is there is a desire not to show a potential plaintiff's attorney that they are "insurance rich." They're wasting their time...the attorney will find out, you can bet the farm on it. If that's their reason, it's a waste of time...and there's also a question as to whether they're providing a fraudulent or misrepresentative document. The certificate may not be actionable, but isn't it usually a good thing to tell the truth?

I guess the other point of view is, why tell them more than they need to know. If you're insured to "at least" what they required, is that sufficient and all they need to know? If it's a legal question, then show the correct amount that truly reflects policy limits. If it's an ethical question, then do what you think is right.

I take the side of just showing the limits that the insured authorizes. It is the insured's information and they get to choose on how much to show. And, in the long run it does not make any difference because the full limits are probably available. Showing less than what is available seems ok to me. Showing more than is available is a definite problem.

I have watched this debate many times. I have never truly sat down and analyzed it, but my thoughts are that since the COI is not a legal contract (no consideration) and it is offered only in a form of providing some level of proof of compliance, I guess I would lean toward the practice being somewhat acceptable. I would probably make some notation in the comments that "Coverage Terms May Be Non-Concurrent."

I go with the $2 million. We constantly harp on agents not to adjust anything from the policy for a cert even if demanded by the certificate holder - including lowering the limits when the agency knows paid claims have reduced the aggregate available. "It's just as if you were sending them a copy of the dec page" is my point. So how can we now endorse making changes just because it's the insured asking instead of the certificate holder? My take is the agent must stay out of the middle - issue the cert with the policy limits from the dec page, period.

Since we are split exactly 50/50, as the Supreme Allied Commander of the VU, I'll cast the "deciding" vote: $2,000,000. Here's my logic:

1.  That's what the certificate implies and the ACORD Forms Instruction Guide says. The official position of ACORD (according to my source) is reflected in what the ACORD Forms Instruction Guide says:

"Enter limits corresponding to those found on the policy declarations page."

Could it be any clearer than that?

The "solution" is to encourage ACORD to change the certificate (and Forms Guide) so that it says that the limits are "at least" this amount, except for any aggregate limit reduction.

2.  The certificate holder is led to believe those are the limits and it just seems ethical to do that regardless of whether the certificate is enforceable.

3.  The certificate holder can probably find out anyway and, whether he/she can or can't, that probably won't affect the size of the suit or the amount of the judgment.

4.  MOST IMPORTANTLY, from an E&O perspective, if there's a "he said, she said" suit against the agency without a lot of documentation and the plaintiff's lawyer can show that the limit on the certificate is NOT the same as that on the policy (despite what the certificate implies or the Forms Guide says), then the lawyer can raise the issue of the agent's honesty and credibility. I believe a plaintiff's attorney would have a field day bringing the agent's integrity into play. Whether that's right or wrong is that point, all that matters is what the jury buys.

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