CertainCert Insurance Certificate Management Blog

An Insurance Certificate Is NOT An Insurance Policy!

  

 Email Article  

Tweet  

  

  

 delicious  

  

  

Insurance certificates are not insurance policies. Every insurance certificate is brief summary of the insurance policies listed for the reference convenience of the certificate holder. Each certificate of insurance generally includes the coverage type, the policy number, the policy effective date, the policy expiration date, the policy limits and the insurance company providing the coverage. Each certificate also states the name of the insured and the certificate holder.

Frequently, we see contract insurance requirements that specify lengthy custom language to be inserted in the desciption field.  This language can be a problem for everyone.  Notwithstanding any requirement, term or condition of any contract, lease, lending agreement or other document requiring the issuance of an insurance certificate, it is essential to note:

• Insurance certificates DO NOT create a contract between an insurer, their authorized representative or producer, and the certificate holder.
• Insurance certificates DO NOT confer any rights upon the certificate holder.
• Insurance certificates DO NOT provide, endorse, amend, extend or alter the coverage of the insurance policy.
• Insurance certificates DO NOT change the terms, exclusions, or conditions of the insurance policy.
• Insurance certificates DO NOT guarantee the limits of insurance, as the limits shown may have been reduced by paid claims.
• Insurance certificates DO NOT guarantee specific notice of cancellation to the certificate holder.

These issues are clearly stated on the face of the ACORD 25 Certificate of Liability Insurance.

While there is room for notes on the bottom of the certificate, this area should be used to identify the purpose of the insurance certificate. The description area can also be used to note attachments to the certificate for such things as additional insured endorsements or waivers of subrogation. Such notations should be a note to the certificate holder to expect such attachments not substitutes for the attachments. The description area should never be used to broaden coverage for the certificate holder. Referencing a contract between the insured and the certificate holder in the description field or elsewhere does not provide coverage no matter how specific the added language is or where it is put on the certificate. The insurance policy alone is the definitive source of coverage, terms and conditions. Only valid endorsements, riders or amendments to the policy issued by an authorized representative of the insurance company can effect changes in coverage.

Certificate holders may have significant power or influence over insurers, but such power does not extend specifically to the insurance companies of the insured’s they want insurance certificates from. If Certificate holder want specific protections that they can rely on, they should insist upon bona fide endorsements, riders or amendments to the policy issued by the insurance company or its authorized representative. Such endorsements or amendments may include:

• Additional Insured Endorsement
• Waiver of Subrogation Endorsement
• Notice of Cancellation
• Notice of Non-Renewal
• Notice of Policy Change
• Primary Language
• Non-Contributory Language

Certificate holders that require lengthy specific language in the description field invariably create additional work for themselves when it comes to insurance certificate management and tracking. Many insured's will not be allowed by their insurance company(ies)to comply with non-standard language requirements. Even those that do endeavor to comply make more work for the certificate holder to carefully review this generally non-binding segment of the insurance certificate.

Certificate holders that want the best results with the least amount of administrative hassle should make sure that their insurance requirements are specific, in writing and in the contract. They should also give ample time for the insurers to review and approve their request, be prepared to pay additional cost to get the changes they desire, and in some cases settle for something less than they would like in exchange for some additional contractual consideration. The additional consideration is essential to ensure that the contractual requirements are not discriminatory and remain enforceable on all other parties. To be effective, certificate holders should have one or more remedies in mind for firms that do not meet the specific requirements by requirement or in total.