Author: Bill Wilson
We get more "Ask an Expert" questions about certificates of insurance than any other single topic...there isn't even a close second. Most recently we were asked when should you check the box under coverages for an additional insured and for what kind of coverages. In this short article, we give four considerations when identifying additional insureds.
"My question has to do with issuing certificates. When should you check the box under coverages for Additional Insured? I have several CSAs in my office that if a blanket AI applies to the GL, they check the box when building their cert holders name and will check it for not only the GL but the Auto and Excess Liability as well. I totally disagree with doing this unless the contract requires it and we have the carrier's approval."
First, it’s our opinion that you are only obligated to indicate additional insured status for the coverages required by the certificate holder, typically those required by contract. If the contract doesn’t require excess coverage, then I would not voluntarily make any entry that indicates that there is excess coverage for an additional insured, even if there is. Otherwise, what you would need is your insured's approval.
Second, if you are indicating that someone is an additional insured for auto or excess coverage and the additional insured endorsement is only for GL, then you have possibly issued a fraudulent certificate…without question, it’s inaccurate. Some states are taking a hard look at this. For example, Louisiana passed a law not long ago that someone issuing a fraudulent certificate is subject to a $5,000 fine and 5 years in prison at hard labor. Losing their agent license or being sued by the AI/certificate holder would be the least of their worries.
Third, be very wary about saying that someone has additional insured status for auto coverage. ISO has a Designated Insured endorsement that is typically used for this, but it doesn’t add any coverage to the business auto policy. It simply reinforces the Who Is An Insured section to clarify that the designated insured is covered for vicarious liability. Many contracts require coverage for an additional insured's direct liability, not just vicarious liability, so if you expressly advise that the coverage is in compliance with such a contract, what you are saying would not be accurate. In addition, contracts often require auto insurance additional insured status on a “primary and noncontributory” basis. I know of no way to do this in the ISO program because primacy is largely governed by ownership.
Fourth, if you are using a blanket additional insured endorsement for GL, keep in mind that they almost always require that the additional insured status be requested in a written contract and it only applies to construction contracts. I know of an E&O carrier that paid a claim of almost a half million dollars because a certificate indicated that additional insured coverage was provided under a blanket AI endorsement, but the agency had not confirmed that the request from this particular AI was in writing (it wasn't).
Be sure to check out the "Featured Resources" area of the VU for a compiliation of certification related documents.
Certificates of Insurance Featured Resources
It’s in the public area of our web site so you can even refer your carriers and insureds to the information.
On November 2, 2009, we conducted a nationwide 2-hour webinar entitled “Certificates of Insurance…Or How I Got a Job in the Prison Laundry.” This webinar has now been archived and is available at a reduced fee. The archived webinar includes the entire audio and web presentation of the original live version. Also included is access to our Certificates of Insurance Resource Page which includes, among other valuable information, 14 pages of Q&A that were received during and after this and an earlier webinar. PLEASE consider making this critical information available to your commercial lines staff. More information:
Your Certificates of Insurance Questions Answered
“One of the pleasures of leaving the independent agency/brokerage world to move to a risk management role was not having to try to find ways to address and control the almost unbearable pressure placed on agency personnel to issue improper, incorrect, misleading, and otherwise wrong certificates. A salesperson or customer screaming that the customer isn't going to get paid for work already performed, or is being prevented from performing work for which they've already contracted, unless and until you do exactly what has been required is a powerful incentive to take the easy way out, issue the darned thing, and let someone else worry about the E&O claim which might well result if a particular series of misfortunes ensue.”
M. Lyn Martin, CPCU, RPLU, ARM, ARe
California Casualty Management Co.
Do you feel pressured to issue inaccurate certificates? Do you really understand what constitutes a certificate misrepresentation? Are you familiar with laws that could hold you responsible for incorrect certificates? Does your agency have procedures in place to deal with unusual certificate requests? Did you know that you can’t say additional insured status is provided on a “primary and noncontributory” basis with absolute certainty? What should you do if a certificate holder wants you to strike the “endeavor to” language from the cancellation notice on the certificate? What does it cost to issue a certificate? Do you have clients whose certificate costs exceed the commission you’re receiving from them? Should you be notifying certificate holders of cancellations and nonrenewals? Should you be reviewing your insureds’ construction contracts, leases and loan agreements and, if so, what should you look for? Could you, like one agency, have a $10 million certificate E&O claim? What can you do to minimize the chance you’ll be successfully sued over a certificate of insurance? Were you unable to attend our November 2, 2009 certificates of insurance webinar that answered these questions? If so, then don’t despair…the full and complete webinar – audio and web presentation – is now available 24/7!
Click here for more information.