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Ask An Expert Briefs

Big "I" Virtual University VUpoint Newsletter
Vol. 20, No. 13 - Issue #476 - June 21, 2019 ~ REPRINT ~ NEW CONTENT COMING JULY 19
Copyright  2019 by the Independent Insurance Agents & Brokers of America, Inc.

The Virtual Universitys Ask An Expert (AAE) service may be our best known member benefit. Daily we receive questions from members wanting help with denied claims, coverage and procedural issues, and agency management concerns. Our faculty includes some of the nation's foremost experts in the insurance industry. These volunteer faculty members generally charge for the time they give to our members. Think about that, the insight you get through our AAE service costs nonmembers THOUSANDS!

For the next two weeks, VUpoint subscribers have access to a few of these incredible insights right here. When the next edition of VUpoint is published, this AAE content go back into the members-only vault. And remember, beyond having access to all of our valuable Ask An Expert content, only members are allowed to ask the questions.


Showing Lower Limits on a COI

Is there anything that prevents a broker from showing lower limits on the umbrella coverage than the policy actually provides? We have clients that have a $5,000,000 limit in one policy, but only want to show $2,000,000 on the certificate. Is this permissible?

Answers:

My advice is to show it with correct limits or not show it at all.

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What color of jump suit is your preference and how do you plan on reimbursing your E & O deductible to your former employer?

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No, it is not permissible. COIs are required to be accurate and true to the actual coverage.

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Of course, it's a lie. Don't do it.

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Doing so may be considered to be a misrepresentation as it does not accurately describe the coverage provided. 

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No, that is misrepresenting the coverage. Either do not show the excess or show the excess with the actual policy limit.

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No. The certificate is certifying the limits shown on the declaration page.

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I recommend extreme caution in placing any information on a Certificate of Insurance that is inconsistent with the provisions and details of the policies shown on the certificate. In other words, I wouldn't do it. I would explain to a client (such this one resisting the showing the full umbrella limits) that should a claim involving that policy occur the true limits will be revealed in the inevitable discovery phase of any legal action.

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If the Certificate Holder requires $2,000,000 and your policy is $5,000,000, you must show the limits that are on the policy. There's no obligation for the carrier to pay beyond the $2,000,000 limit if that's what the contract limits the exposure to. Altering the limits from what is shown in the policy, or changing any other information on the COI is illegal in most states.

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Sounds misleading to me. What do you call a statement made with the knowledge that it isn't true? If you can get your insurance company to sign off on it, I suppose it's OK, but something about professional ethics troubles me about doing it.

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According to ACORD, you should show the limits on the declaration page.

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No, it is not permissible. Certificates should reflect what coverage and limits are being provided.

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The standard is you show the policy limit not what the client wants you to show.

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If you list the umbrella on the Certificate, you must show the accurate limit on that policy. Go to the ACORD website for instructions in handling those situations. Issuing the Certificate showing an inaccurate limit is a violation of your ACORD licensing agreement.


Proper Named Insureds on the PAP

Legally married husband and wife are living in separate households. Both listed as named insureds in the declarations. Not legally separated, and neither has filed for divorce. Does their Personal Auto Policy (ISO 2003: PP 00 01 01 05) still cover the non-resident spouse as though they were living in the residence? I interpret that they are both covered as long as they are both named in the declarations, regardless of being a household member. Is that correct?

Answers:

The ISO PAP defines you" as the named insured shown in the declarations; and the spouse if a resident of the same household. This is a two-part definition. Named insured status is not based on residency so if both the husband and wife are shown in the declarations, they qualify as you," whether or not they reside together. If one spouse is shown in the declarations and the other spouse is not, the unlisted spouse must reside with the named insured. Of course, this is the ISO approach and may or may not apply to other Personal Auto Policies.

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Named insureds are named insureds. But you have a duty to notify the carrier and it may have the option of mid-term cancellation if this is considered a material change in the risk (which it may be).

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If both are named on the policy, both should receive identical coverage. Two potential problems occur to me: First, even though both are named, there is probably only one mailing address. Changes in coverage are only sent to the address shown on the policy, so it's possible that a material change could occur (initiated by either an insured or the insurance company) and one of the insureds would be in the dark. The other potential problem is that the different garaging locations might be a material underwriting consideration for the insurance company. You're obligate to make your principal aware of any information that might impact them, so I think you're bound to tell them what's going on. If they're OK with this arrangement, and if the mailing address issue doesn't bother anyone, then I guess you're in the clear. Under the circumstances, I think I'd feel better if I had recommended separate policies. Insureds will probably reject that idea because of the loss of the multi-car discount but at lease I'd be on record as having recommended it.

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I see your point. The PP 00 01 does state that you" and your" refer to the named insured shown in the Declarations and the spouse if a resident of the same household. However, I'm convinced the safe play for you as their agent is to recommend separate policies for each spouse. Who knows what unanticipated activities and actions will be undertaken by the individual spouses living separately? Who knows what coverage challenges the insurer could raise after some unanticipated and perhaps unusual event? If some coverage issue does develop, guess who will be at fault?

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If both are named insureds, then each of them is a "You" and coverage should follow each of them. That is why I recommend each spouse be individually named. Sometimes they establish separate households for a time out or separation or because of jobs or other reasons AND they don't inform the producer of the changes.

Nonetheless, they still have the obligation to report changes to the insurance carrier and likely you do as well, especially if you are an appointed agent of the company. At a time of loss, failure to disclose changes could be used against the insured dependent on the fact pattern of the loss and the reasons and timing of separate households.

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When both are named insureds on the policy declaration page, you are correct that they are covered even when living separately.

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Of course check the wording in the specific policy but in most policies the answer is yes. Be sure to list the correct garaging address and be sure you have documentation that the underwriter is fully informed and you have also documented that the underwriter agrees that this is the correct way to handle the situation.

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The policy very clearly gives coverage to the "named insured" shown in the declarations. The problem would arise if it was written in one insured's name only. The unnamed spouse would only get coverage while living in the same "household" (careful with that word)!


Carrier Payment for Rekeying of Stolen Auto

Our insured left his key and key fob in the pickup while parked in his garage overnight and his pickup was stolen. His pickup was later recovered with minimal damage; however, his key/key fob was not recovered. The claims department is paying for a new key and key fob as well as to rekey the ignition; however, they will not pay to rekey the doors, tailgate or the console. With the key/key fob that the thief has in his possession he would be able to get into the pickup, but since the ignition was rekeyed, they would not be able to start the vehicle. Our insured is upset because he wants the doors, tailgate and console to rekeyed as well as this issue did not exist prior to the loss. The company has refused to pay the additional $600 for this. What is your opinion?

Answers:

It seems to me that the insured will not be indemnified unless all the rekeying is performed.

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Stupid adjusting. Talk to claims manager.

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The policy pays for direct loss, so you have to look at the coverage problem from that angle. If part of the vehicle is damaged by an insured loss and can't function, that's exactly what physical damage covers. It makes no sense to pay to restore one function of the damaged part (the ignition) and not another (the door). Not only that, It makes the insurance company look cheap. Try talking to a supervisor.

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I would make the argument that paying the $600 will allow them to avoid another, more expensive loss when they guy comes back to break in again.

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Request a meeting with the claim supervisor. The scenario you describe is ludicrous by not re-keying the other entry points to the vehicle or storage area.

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Most auto policies cover direct" damage and rekeying anything doesn't sound like direct damage. That being said, see if there is a requirement to protect the property from further damage or loss and, if so, if the insurer says they will pay that expense. If so, then that might be the basis for a claim for this additional expense.

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The Part E - Duties after an accident or loss requires the insured under D1 to take reasonable steps to protect from further loss. This is the only possible argument for coverage since this is not a "direct damage loss" to property.

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