Certificates of Insurance: Just When You Thought It Was Safe

It seems as though there is no end to the discussion and debate surrounding the use of the various ACORD Certificates of Insurance and their companions, the ISO Additional Insured endorsements. While the improper issuance of Certificates and failure to provide the correct Additional Insured endorsement is not a leading cause of agency errors and omissions claims, the upward trend in claims brought against an agency by third parties is causing concern among E&O carriers. In terms of frequency, Certificates and AI issues account for about 3% of all E&O claims, but unfortunately nearly every one presents a severity exposure, because of the limits shown on the Certificate.

In 2009 and 2010, ACORD made several revisions to their suite of Certificate products. Most notably, the cancellation provisions were changed from the previous “insurer will endeavor to” wording, to a statement that “notice will be delivered in accordance with policy provisions”. This change, while more accurately reflecting the actual intent of the insurance company (i.e., to send notice to those parties to whom a duty is contractually owed under the policy) has caused some rankle among Certificate requestors. Agents and brokers are being asked to provide evidence of insurance using outdated ACORD forms in an attempt to turn back the clock rather than deal with the changes.Clients and third parties are putting agencies in an awkward, if not dangerous position of providing what is being requested, rather than what the industry and the insurance companies are willing to support, which will likely lead to even more E&O losses. A further complication is that the agency’s management system may not offer the most current version of the forms unless it has recently been updated.

These issues will not be easily or quickly resolved, as each side has a vested interest in a particular outcome. We will continue to keep you informed through our webinars, public seminars and in-house courses as we all try to navigate the minefield that has been created with that simple, yet oh-so-complex, document.


Cheryl L. Koch, CPCU, CIC, AAI, ARM, AAM, AIM, AIS, ARP, API, ACSR, AFIS is the Managing Director of Insurance Skills Center/IBA West Education