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Should a Certificate of Insurance Show a Reduced Aggregate Limit?

An instructor at a CIC Ruble class makes a comment about certificates of insurance limits that comes as a surprise to an independent agent.
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An independent attended a Certified Insurance Counselors (CIC) Ruble class where the instructor made a comment about certificates of insurance limits that came as a surprise.

The instructor said when an agent issues a certificate of insurance and knows claims have been paid that have reduced the aggregate, it means the aggregate limit shown on the certificate should match the limits left in the policy.

The instructor even went so far as to suggest agents should check on paid claims before issuing mid-term certs. The attending agent disagreed.

Q: "The Acord 25 FIG says the limits shown on the certificate should be those on the policy declarations page and contains the following wording: 'Limits shown may have been reduced by paid claims.' But the instructor said that in spite of that wording, agents have been sued for failing to update the certificate of insurance—though he was unable to provide any specific supporting cases or examples.

The issue here is not the certificates issued at policy inception, but certificate requests submitted mid-term, especially for contractors. If we have a per-project aggregate, this should be a moot point. As an aside, our agency standard procedures are to request a per-project aggregate for all contractors."

A: “We agree with you. It is not practical to check on claim status every time a certificate of insurance is issued. In fact, you open yourself up to an E&O claim if you establish a practice of doing this on every certificate of insurance—and then miss one. As you say, the ACORD FIG clearly says to show the limit on the Declarations page and cautions the certificate holder that the aggregate may have been reduced.”

Bill Wilson is director of the Big “I” Virtual University.

This question was originally submitted by an agent through the VU’s Ask an Expert Service. Answers to other coverage questions are available on the VU website. If you need help accessing the website, email to request login information.

Tuesday, June 2, 2020
Commercial Lines