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What Can/Should I Enter in the ACORD 25 “Description of Operations” Field?

Author: Bill Wilson
 
Question"I recently attended the NetVU conference in Nashville and took a class regarding issuing certs. Our instructor told us there is a guideline by state of what can be entered into the “Description of Operations” box. Is this available on your website? Here are just two examples of what we've been asked to show:
 
"ABC Incorporated or subsidiary is included as an additional insured. Contractor's policies are primary. Insurers agree to waive right of subrogation against ABC Incorporated or subsidiary. Insurer will notify ABC Incorporated in addition to the named insured on any and all cancellation notices.
 
"ABC, LLC, DEF, LLC, GHI, LLC, JKL, LLC, MNO, LLC, PQR, LLC, STU, LLC, VWX, LLC, YZA, LLC, BCD, LLC, EFG, LLC, HIJ, LP, KLM, LLC - Certificate holder is named as an additional insured as per written contract. The policies are primary to and not in excess of or contributory with any other insurance available to certificate holder with respect to liability arising out of contractor's operations. Contractual liability is provided under both general and automobile liability policies. Explosion, collapse, and underground coverage has not been excluded from the general liability policy. Waiver of subrogation is included on Workers Compensation. The excess/umbrella follows form over the general and auto policies.
 
"There's not even enough room for all of this information to show on the Description of Operations when the certificate is printed. Help!" — Iowa agent
 
 
AnswerWhat can be entered in the Description of Operations (DOO) field of the ACORD 25 depends on what they’re asking you to enter, so it depends on each specific request. Generally speaking, if what you’re being asked to show in the DOO field is not illegal (a violation of insurance or other laws, regulations or regulatory directives) AND it does not misrepresent policy coverages and terms, you can put it on the certificate of insurance (COI).
 
That doesn’t mean it’s a good idea, but you can probably do it. There are lots of things I see agencies put on certificates that can easily lead to E&O claims and I've literally been told that certain language is requested to maximize the chance that your E&O policy will be triggered if not the CGL or other policy shown on the certificate. This language often creates an "E&O noose" that you stick your head in by entering the language on a COI.
 
We recommend that, if at all possible, you don’t show anything in that field or otherwise provide any commentary beyond the fill-in-the-blanks or checkmark items on the COI. Incorporate the ACORD Forms Instruction Guide (FIG) into your agency procedures, at least by reference. The ACORD FIG instruction for the Description of Operations field says:
 
"As used here, records information necessary to identify the operations, locations and vehicles for which the certificate was issued."
 
It does not say anything about additional insured information, waivers of subrogation, or anything else beyond the limited information this field is intended to show. If details of this information are critical to the requestor, with your insured's permission, provided them with a copy of the forms and place the onus on them to read them and determine if they meet their contractual requirements. There is case law that supports this.
 
If you feel you MUST add verbiage, be very, very careful what you say and how you say it. Again, I’ve actually been told by risk managers and attorneys that some of the language they want on a COI is for the purpose of using the agent’s E&O policy as a backup for coverage. The language they request is the noose and they want you to slip your neck through it in case they need to give it a good jerk at claims time when it’s discovered that there is no, or inadequate, coverage.
 
With that in mind, let's dissect the two examples you provided. First:
 
"ABC Incorporated or subsidiary is included as an additional insured. Contractor's policies are primary. Insurers agree to waive right of subrogation against ABC Incorporated or subsidiary. Insurer will notify ABC Incorporated in addition to the named insured on any and all cancellation notices."
 
First, read this VU article:
 
 
Based on the case law cited, “or subsidiary” might not be an additional insured, depending on which AI endorsement is used. The CG 20 33 requires contract privity…that is unlikely with regard to a subsidiary, so saying they ARE an AI might not be accurate. The article also discusses “performance privity”…the only construction AI endorsement I’m aware of that does not tie AI status to “performing operations FOR” the entity is the CG 20 26 so, again, any entity that the insured is not working FOR might not be an AI. That is supported by one of the court cases cited in the article.
 
Saying “Contractor’s policies ARE primary” is a guess. It’s impossible to say that with certainty unless you have also examined the Other Insurance Clause in the ADDITIONAL INSURED’S CGL policy. Here is an article that cites case law that supports that contention:
 
 
This being said, the best endorsement for this purpose I’ve seen in the marketplace is the ISO CG 20 01 which at least expresses the insured’s insurer’s intention of being the primary insurer. Be wary of some proprietary insurer P/NC endorsements or P/NC language in their AI endorsements that are very poorly constructed, sometimes creating a liability for the carrier itself that its drafters almost certainly did not intend.
 
The waiver of subrogation statement might be true if that’s in the policy or added by endorsement.
 
The cancellation notice statement would have to be supported by a cancellation notice provision in the policy or added by endorsement.
 
Here is your second example:
 
"ABC, LLC, DEF, LLC, GHI, LLC, JKL, LLC, MNO, LLC, PQR, LLC, STU, LLC, VWX, LLC, YZA, LLC, BCD, LLC, EFG, LLC, HIJ, LP, KLM, LLC - Certificate holder is named as an additional insured as per written contract. The policies are primary to and not in excess of or contributory with any other insurance available to certificate holder with respect to liability arising out of contractor's operations. Contractual liability is provided under both general and automobile liability policies. Explosion, collapse, and underground coverage has not been excluded from the general liability policy. Waiver of subrogation is included on Workers Compensation. The excess/umbrella follows form over the general and auto policies."
 
For this laundry list of AIs, the same comments above apply with regard to contract and performance privity. Also, I would avoid saying unequivocally they are AIs “as per written agreement.” The contract the insured signed does not control AI status. IF they are AIs, they would be AIs “as per the enclosed endorsement(s)” and I would provide copies of the AI endorsement(s) and, again, put the onus on the certificate requestor to determine if the AI coverage afforded by such endorsements meets their contractual requirements.
 
The “primary and noncontributory” statement, as I outlined above, cannot be made absolutely without reviewing the other parties’ CGL policies. Where you have a lengthy list of AIs like you do above, this would require examining every one of their CGL policies, something you obviously don’t have time to do (though the requestor thinks you do have the time and, in fact, probably views you like a government agency that exists to serve them). Therefore, if P/NC status is being provided by the ISO CG 20 01 endorsement, I’d just include a copy of it for them to review.
 
The “Contractual liability is provided under both the general and automobile liability policies” statement is nonsensical. What do they mean by “contractual liability”? The ISO CGL policy EXCLUDES contractual liability but then provides some coverage by exception. It does not cover ALL forms of contractual liability, mainly just the assumption of tort liability to a third party. The statement they want you to add is too broad and, if there is an uncovered breach of contract claim, these parties might allege that you misrepresented coverage. Once again, if necessary, give the requestor a copy of the policy and let them make their own determination whether the coverage provided complies with this requirement.
 
If we’re talking about an ISO CGL, XCU is not excluded and this would likely be an accurate statement unless such an exclusionary endorsement has been added, though keep in mind that such a loss might not be covered because of other exclusions. But, if I had to say anything, I'd rather express it as "XCU is not excluded" than "XCU is covered."
 
The subro waiver for WC could be accurate if the NCCI endorsement is provided. Note that they don’t say against whom subrogation is waived.
 
With regard to an excess/umbrella policy being “following form,” that’s another broad statement of a usually undefined term. If they’re wanting you to say that an excess/umbrella policy covers everything the underlying policies do and adds no other exclusions, that’s highly unlikely. Most umbrella/excess policies are not going to cover everything covered by the underlying (e.g., UM coverage) and many may impose additional exclusions.
 
With regard to the problem of adding verbiage in the DOO field that won't show on the printed form, you can use the ACORD 101 to add commentary to a certificate. That’s what it’s designed for. However, again, we would encourage you to try to not provide ANY extraneous verbiage beyond the minimum necessary field or checkbox information. In lieu of such verbiage, supply the policy form(s) and, again, put the onus on the requesting party to do their own vetting of insurance compliance with their contracts. Your E&O insurer will appreciate it!
 
For more information about certificates of insurance, go to the Featured Resources area of the VU. Much of the information here is public and you can refer your underwriters and customers to this area.
 
Finally, you can dig deeper on these issues with several of our recent webinars by clicking here to view our Recorded Webinars.
 
 
 
UPDATE
 
We received the following email from a member agent shortly after this article was published. With his permission, below is his email, interspersed with our comments.
 
From: Tom Bormann
Sent: Monday, April 21, 2014 6:20 PM
To: Bill Wilson
Subject: Another go at Certs
 
Bill,
 
I just read your latest article on certs – the one about what can be put in the Acord 25 “Description of Operations”.
 
My approach is a middle path. I’ll state so-and-so is an AI on a P/NC basis with waiver of subrogation (if they ask for them) – to the extent provided in the attached forms, and I provide the policy forms. That covers the multiple names and other situations. They almost never come back, probably because they don’t read them.
 
That’s the way to do it…refer them to the forms. I see a lot of “ABC, XYZ, et al. are additional insures as per written contract.” The contract doesn’t control their status as AIs, the policy does.
 
If I have an architect, I endorse the policy.
 
If there’s no written contract, I endorse the policy (except for [one carrier] who covers oral contracts). If I can’t get a copy of the written contract, I’ll include verbiage about being an AI if required by a written agreement.
 
Do you by any chance have a sample of [this carrier's] form or wording? Our national Technical Affairs committee has asked ISO for something like this. We meet with them in June.
 
If they want Contractual coverage to cover the hold harmless agreement, I tell them no policy does that.
 
Absolutely correct. I see all kinds of requirements for language on certificates or elsewhere that basically say that the CGL policy covers the contracts the insured has signed.
 
If they want Broad Form PD, I tell them no such coverage exists. I can just see the claim where some PD claim is denied and they say it  would have been covered by BFPD.
 
The first time I was asked to be an expert witness was in a shopping center fire loss with a huge coinsurance penalty. The agent has used the words “all risks” on the certificate. The plaintiff said he thought “all risks” meant “guaranteed replacement cost” and that the limit on the policy didn’t mean anything. This was an astute insured who was an attorney who had been buying, selling, and insuring commercial properties for over 30 years, so he knew exactly what “all risks” meant but people like this get real dumb at claim time.
 
If they want a “following form” umbrella or excess policy, I tell them there is no such thing, as all policies have their own terms, conditions and exclusions.
 
Absolutely correct.
 
If they want a notice of cancellation or “material change”, I tell them it’s not available and that they should include a requirement in their contract that their sub provide them with a notice.
 
That’s how the City of Atlanta does it. They stopped asking for cancellation notice because: (1) it was rarely provided even if the certificate said it was, (2) following up on all of this was taking a huge amount of time they could more productively spend on other tasks, and (3) looking back over the past 15 years, they could not find one example of where they got burned by a policy cancelling without notice to them.
 
Generally, all of this info goes on an Acord 101, which I reference on the Acord 25, along with the project name. These 101s aren’t much work, because we can cut and paste a lot.
 
The key to all of this is that it only applies to the extent provided in the attached forms. This approach solves almost all potential bounce-back issues.
 
On a closely related subject, we provide a list of coverages required and a number of statements their subs must agree to for all of our subcontractor clients (with a proper disclaimer so we can’t be accused of practicing law).
 
For example, we don’t require Contractual. Instead, we state their GL coverage shall not contain a modification or limitation of contractual liability, including injury to anyone’s employees. We also state the sub’s GL shall not contain a limitation for damage to work performed by a sub of any tier, nor shall it exclude earth movement or subsidence of land. Those are all exclusions, among others, that frequently turn up in standard as well as non-standard policies.
 
These are good ideas, though they require a great deal of diligence given the variety of really awful CGL policies in the marketplace. I’ve told the story of having to hire a tree service to take down, remove, and stump-grind 19 trees in my yard after a tornado, some of the trees being 80 ft. tall. I asked for proof of insurance from the 4-5 bidding services. One of them had an E&S package. The 2004 ISO CGL policy was fine, but attached to it were 42 endorsements and the premium was only $700…signs that something was not right.
 
One of the endorsements said they were only covered for the activities contemplated in the codes used to rate them. They were rated as “tree pruning and trimming.” I’d say taking down an 80-ft. cedar tree involved more than “pruning and trimming.” Another endorsement said they had no coverage for “ongoing operations” and “your work.” In other words, they basically had an old OL&T premises liability policy that covered neither ongoing nor completed operations. The tree guy was complete oblivious to his lack of coverage and the insurer and broker should be ashamed for writing such a policy, knowing his exposures and how lives and property would be endangered by someone with essentially illusory insurance.
 
 
Tom Bormann, CPCU, CIC
HSHC Insurance Agency
St. Louis, MO
 
 
June Update:
We just received another good example of what NOT to show under the ACORD 25 DOO:
 
The agent of an upstream party is insistent that the agent of a subcontractor issue a certificate of insurance identifying the project owners, general contractor, architect, and engineer as additional insureds. In addition, she wants the following language to be entered in the COI Description of Operations:
 
“Waiver of Subrogation applies to the Workers Compensation. Workers compensation waiver of subrogation applies to all of the additional insureds. Additional insured coverage applies to the general liability and business auto coverage. Primary and non-contributory coverage applies.”
 
As just one example of the danger in pontificating on a certificate about coverage details…if she’s using ISO forms, ISO has no way to provide primary and noncontributory coverage on their business auto policy. The Other Insurance clause does not work like their CGL policy and primacy is governed largely by ownership. So, if she has issued certificates that claim the auto coverage is provided on a primary and noncontributory basis, then she has likely misrepresented the coverage. If she did this for a Louisiana account, the potential penalty is 5 years in prison at hard labor. The potential fine in Alabama is $10,000 per violation.
 
The requesting agent states:
 
“I am not sure why you would not feel comfortable completing  the certificate as required.  I have been processing certificates for my own Insureds for almost 15 years and have never refused to provide the language my insured needed.”
 
A red flag should be frantically waived in front of an agency owner’s nose when an agency staff member says she has NEVER refused to put any language on a COI that has been requested. If this is true, then it raises the question of whether this person really understands the implications of what she has been doing.
 
In addition to the above, there is a potential danger simply in stating categorically that various entities ARE additional insureds. The agent can claim that an entity is an AI and it appears that such status is provided by an endorsement. However, you may then have courts that determine that there is no privity of contract or performance and, thus, no AI status. An example of that is the case of Westfield Insurance Company v. FCL Builders, Inc. outlined in the following article:
 
 
For these and other reasons, it is not a good idea for an agent completing a COI to include a dissertation on coverages and policy terms. The policy forms should speak for themselves. If it was possible to condense a multi-paragraph policy term into a six-word phrase, the policy itself would have such abbreviated language.
 
The upstream party has a contract with certain indemnity and insurance requirements. It is the responsibility of the upstream party and/or the drafter of those requirements to determine whether a downstream party’s insurance program meets their contractual requirements.
 
 
Last Updated: June 19, 2014
April 25, 2014
April 11, 2014
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