Acord Certificates of guarnatee - What Certificate Holders and Providers Need to Know
The Certificate and Evidence of insurance forms which Acord made productive in late 2009/early 2010 have raised alarm among insurance certificate holders and the insureds that must furnish them. Unless insurers issue manuscript endorsements to their policies (which is unlikely), insurers no longer make any pledge that they will even attempt to familiarize most certificate holders if the policies are cancelled. The new certificate forms have eliminated the insurance that the insurer would "endeavor to mail __ days written notice to the certificate holder." They naturally state that "...should any of the above described policies be cancelled before the expiration date thereof, notice will be delivered in accordance with the policy provisions."
Acord Certificates of guarnatee - What Certificate Holders and Providers Need to Know
What does that mean to certificate holders under acceptable insurance policies?
Liability and auto - Even if a certificate owner is an further insured, it will not be notified if the policy is cancelled. Only the First Named Insured will be notified.
Workers recompense - Certificate holders will not be notified of cancellation, since the policy requires the insurance firm to familiarize only the covered employer.
Property - Mortgagees and loss payees on acceptable asset policies will be notified - 10 days before the insurer cancels for nonpayment, 30 days before it cancels for any other fancy and 10 days before it nonrenews the policy (unless modified by state requirements). Other certificate holders, even further insureds, will not be notified.
All policies - Certificate holders, even further insureds, will not be notified if the insured itself cancels the policy.
How should insurance requirements in contracts be changed in order to respond?
Contract language requiring insurance certificates to state that "__ days notice of cancellation be given" and requiring that the "endeavor to" language in the certificate be deleted, is no longer applicable. Even if changes are made to the certificate, Acord has made it exceedingly clear that changes to the certificate do not change the policy.
The covenant should require that the insured party furnish immediate notice to the owner, lessor, etc. If the insured entity receives notice of cancellation or nonrenewal from its insurer. This provision is especially important since many insurers will not be willing to comply with the recommendations below, especially for smaller insureds. Unfortunately, this has the positive drawback of depending on the very party who is non-performing to record the non-performance.
Contracts should require that the insured's policies be endorsed to meet the certificate holder's reasonable requirements. (However, as stated above, not all insurers will be willing to cooperate.) If the insurer is somewhat cooperative, it may be willing to extending the same announcement proprietary to the certificate owner that it gives to the first Named Insured. Below is sample manuscript endorsement wording that would perform that end. Very large insureds may be able to collect even broader announcement rights.
"If we cancel or elect not to renew this policy, we will give written notice to ____________ at the following address __________________. We will furnish the same notice of cancellation and nonrenewal that is required by this policy to the first Named Insured."
So if the certificate owner is given the same notice of cancellation and nonrenewal as the first Named Insured, what does that beyond doubt mean with acceptable policies?
Standard market insurance policies furnish the first Named Insured with 10 days notice of cancellation for nonpayment of premium. If the insurer cancels mid-term for any fancy besides non-payment of premium, market normal liability, automobile and asset policies furnish 30 days notice of cancellation. Workers recompense policies, however, furnish only 10 days notice of mid-term cancellation. If an insurer nonrenews a policy versus cancelling it mid-term, it may nonrenew a market automobile or workers recompense policy without any enlarge notice at all. asset policies may also be nonrenewed without any enlarge notice to the insured, but if there is a mortgagee or loss payee on the policy, they must be given at least 10 days enlarge notice. normal liability policies may be nonrenewed with just 30 days notice.
State laws in most states change the above requirements, requiring more notice in many situations. For instance, Florida requires that carriers furnish the first Named Insured with 45 days notice of cancellation in some circumstances. The provisions of the distinct state laws are often complicated, differing not only by line of coverage but also by length of time the policy has been in force, the exact reasons for the cancellation or nonrenewal, etc. The exact state requirements can be accessed straight through the Irmi insurance Cancellation Guide published by the International Risk supervision Institute.
The larger the insured client, the more likely that it will be able to collect further concessions from its insurer. If possible, those further provisions should require:
Advance notice to the certificate owner even if the insured initiates the cancellation or nonrenewal and
Minimum cancellation and nonrenewal provisions, regardless of what is in case,granted by the acceptable policies or discrete state laws.
Why not just require the old form?
You may ask, "Why doesn't the certificate owner naturally require the insured and its insurance agent to furnish the old certificate of insurance form?" What certificate holders and insureds should know is that if an agent does modify a acceptable certificate or signs a custom one that provides notice of cancellation, it is almost beyond doubt doing so against the explicit direction of the insurance company. So while the certificate owner may have a paper in its hand which states that the insurance firm will furnish notice of cancellation, the insurer will not stand behind it. If coverage is cancelled, all that the certificate owner has probably gained is the right to sue the agent and its errors and omissions carrier. Since the agent is probably executing the modified certificate with the full knowledge that it is not authorized to do so, coverage under its errors and omissions policy is suspect. For a fuller insight of why an agent executing modified certificates is enthralling in a custom which may be unauthorized, deceptive and potentially illegal, please see the record written by Bill Wilson of the Independent insurance Agents and Brokers of America at http://www.iiaba.net/eprise/main/Vu/NonMember/WilsonCancellationNotice.htm.
Vendor solutions
I am aware of about 20 distinct vendors who furnish some form of insurance certificate and verification service. I have found only one seller that provides a certificate assistance that thoroughly bypasses Acord certificates and their problems. I pass on their information as a assistance to readers. Their name is Ins-Cert Corporation, and information on their services can be found by doing an Internet hunt under that name. Their ideas is Web-based and requires the agent/broker to agree to make a "good faith effort" to enter notices of cancellation into their system. The ideas then automatically sends cancellation notices to all certificate holders by email. Their ideas appears to offer a clarification to both the question of cancellation notices and also the question of fraudulent Acord certificates. From my investigation I believe they offer a legitimate assistance and are worthy of consideration. Readers of this paper who have found other workable solutions to this question are asked to perceive me.
Why the "Good Ol' Days" Weren't beyond doubt So Good -
Certificate holders beyond doubt wish that the insurance industry would find a way to familiarize them when an insurance policy is cancelled. But in reality, they may not have lost much in this change besides the illusion that the insurer would familiarize them.
Many insureds have a "blanket further insured" endorsement on their liability policies. That means that whatever that the insured agrees to name as an further insured in a covenant is automatically given that status in its insurance policy. But that also means that the insurance firm does not collect the names and addresses of those further insureds, so the insurer does not know who they are or how to familiarize them.
Certificate holders would reasonably assume that as a matter of good faith, insurers would require that the agents/brokers send them a list of all of the certificates that they issued so that the insurer could "endeavor" to give notice of cancellation. Incredibly, that is not the case. Many carriers have explicitly told the agents/brokers not to send them copies of the certificates.
Since many insurance carriers have not made the good faith attempt to comply with the notice requirements of the old certificate forms, not much is lost by eliminating the notice requirements altogether. At least false promises are no longer being made.
Closing thought
In writing about these changes on its own Website Acord explained that it had to change its certificates because they sometimes contradicted or expanded the duties contained in the fundamental insurance policies. Unfortunately, they were not able to cooperate with the other players in the insurance industry (the insurance companies, Iso and Ncci) to craft a clarification which solved that question while also meeting the legitimate firm need of certificate holders to receive a cancellation notice. The outcry from the firm community may need to get much louder before a better clarification to this question is reached.
The information presented here is necessarily normal and is not intended as legal advice.
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