Tackling Certificates of Insurance
By: Brett Nilsson
In response to many inquiries and concerns from agents around the country, I would like to address a current industry hot topic—certificates of insurance.
Most of you have insureds who are being asked to sign construction/service contracts, lease/loan agreements or other documents that require a certificate of insurance. It is here that problems arise, as many of these contracts make demands that are, for all practical purposes, virtually impossible to meet. Many of these documents are based on indemnity agreements for which virtually no insurance program can provide full compliance.
Agents are then placed in situations where their insureds are required to obtain certain wording on certificates of insurance in order for them to be paid for work they have performed. The Big “I” is working on this situation through the Virtual University’s “Ask an Expert” service. The VU has received many communications and concerns from members, as well as state and national associations.
An Iowa agent recently reported that one of his agency’s CSRs, in the first hour the office was open on a Monday morning, received calls from 13 different banks that were being audited. It appears it was easier for them to call the agency than to look in their files for the ACORD forms the auditor wanted to see. An Illinois agent also reported that more than two hours were spent reissuing a certificate four times until it met every single specific detail requested. In this particular case, the requestor wanted the CSR to just show “NA” for “not applicable” rather than her “N.A.”
In another case, a customer of a retail office furniture store insisted on being named as an additional insured on the store’s CGL policy for both prem./ops and products/completed operations. The agent wrote the account on a BOP which did not include completed operations coverage on its additional insured endorsements. In order to comply, the agent had to rewrite the policy to a commercial package. In short, the certificate requirements were driving the type of policy that could be written.
It is clear that insurance requirements and certificate requests are escalating out of control. Agents are being placed in circumstances where they must issue an unlimited number of certificates, and handle the demands of financial institutions and lenders who have no idea of the costs associated with the service this provides. Many of our agents will issue thousands of certificates a year at substantial costs to their agencies.
And I haven’t even touched on the implications of errors & omissions. This sector has also seen substantial increases in filed claims, as well as settlements—some ranging in excess of several million dollars.
So what do we do? Your Big “I” board of directors has already adopted a formal position on certificates of insurance. That statement, along with volumes of information on certificates, is available to members and the general public on the VU’s Web site, www.independentagents.com/vu.
Many state associations are now working with their regulators and legislators to implement laws or regulatory directives on certificates. Did you know that Louisiana added criminal penalties that could result in imprisonment for up to five years for fraudulent certificates? You can find a state-by-state listing of these laws and directives on the VU site.
The Big “I” will continue its education and governmental affairs initiatives, publishing articles in construction and transportation publications, and speaking at conventions and conferences. By working together to educate our legislators and regulators, we will improve our current circumstances and alleviate the exposures so many agents face.
We promise to continue our efforts on your behalf, and will continue to provide research and tools to assist and educate you on these important issues. Again, we thank you for your membership and your support as we work together to improve this great industry.
—Brett Nilsson, Chairman
Most of you have insureds who are being asked to sign construction/service contracts, lease/loan agreements or other documents that require a certificate of insurance. It is here that problems arise, as many of these contracts make demands that are, for all practical purposes, virtually impossible to meet. Many of these documents are based on indemnity agreements for which virtually no insurance program can provide full compliance.
Agents are then placed in situations where their insureds are required to obtain certain wording on certificates of insurance in order for them to be paid for work they have performed. The Big “I” is working on this situation through the Virtual University’s “Ask an Expert” service. The VU has received many communications and concerns from members, as well as state and national associations.
An Iowa agent recently reported that one of his agency’s CSRs, in the first hour the office was open on a Monday morning, received calls from 13 different banks that were being audited. It appears it was easier for them to call the agency than to look in their files for the ACORD forms the auditor wanted to see. An Illinois agent also reported that more than two hours were spent reissuing a certificate four times until it met every single specific detail requested. In this particular case, the requestor wanted the CSR to just show “NA” for “not applicable” rather than her “N.A.”
In another case, a customer of a retail office furniture store insisted on being named as an additional insured on the store’s CGL policy for both prem./ops and products/completed operations. The agent wrote the account on a BOP which did not include completed operations coverage on its additional insured endorsements. In order to comply, the agent had to rewrite the policy to a commercial package. In short, the certificate requirements were driving the type of policy that could be written.
It is clear that insurance requirements and certificate requests are escalating out of control. Agents are being placed in circumstances where they must issue an unlimited number of certificates, and handle the demands of financial institutions and lenders who have no idea of the costs associated with the service this provides. Many of our agents will issue thousands of certificates a year at substantial costs to their agencies.
And I haven’t even touched on the implications of errors & omissions. This sector has also seen substantial increases in filed claims, as well as settlements—some ranging in excess of several million dollars.
So what do we do? Your Big “I” board of directors has already adopted a formal position on certificates of insurance. That statement, along with volumes of information on certificates, is available to members and the general public on the VU’s Web site, www.independentagents.com/vu.
Many state associations are now working with their regulators and legislators to implement laws or regulatory directives on certificates. Did you know that Louisiana added criminal penalties that could result in imprisonment for up to five years for fraudulent certificates? You can find a state-by-state listing of these laws and directives on the VU site.
The Big “I” will continue its education and governmental affairs initiatives, publishing articles in construction and transportation publications, and speaking at conventions and conferences. By working together to educate our legislators and regulators, we will improve our current circumstances and alleviate the exposures so many agents face.
We promise to continue our efforts on your behalf, and will continue to provide research and tools to assist and educate you on these important issues. Again, we thank you for your membership and your support as we work together to improve this great industry.
—Brett Nilsson, Chairman
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