IIABCal Task Force to Examine ACORD Certificate Issues

The IBA West Board of Directors will appoint a task force of members to recommend legislative or other solutions to problems caused by a new Certificate of Insurance form created by the Association for Cooperative Operations Research and Development (ACORD).

The ACORD 25 Certificate of Liability Form, revised in October 2009, included a significant change in the provisions dealing with notice of policy cancellation to certificate holders.

Older ACORD forms stated that: “SHOULD ANY OF THE ABOVE DESCRIBED POLICIES  BE CANCELLED BEFORE THE EXPIRATION DATE THEREOF, THE ISSUING INSURER WILL ENDEAVOR TO MAIL __ DAYS WRITTEN NOTICE TO THE CERTIFICATE HOLDER NAMED TO THE LEFT, BUT FAILURE TO DO SO SHALL IMPOSE NO OBLIGATION OR LIABILITY OF ANY KIND UPON THE INSURER, ITS AGENTS OR REPRESENTATIVES.”

The new ACORD form states:  “SHOULD ANY OF THE ABOVE DESCRIBED POLICIES BE CANCELLED BEFORE THE EXPIRATION DATE THEREOF, NOTICE WILL BE DELIVERED IN ACCORDANCE WITH THE POLICY PROVISIONS.”

According to ACORD, “the word “endeavor” was removed because policy cancellation provisions generally don’t use the word “endeavor”. Only a policy can obligate an insurer to provide notice of cancellation.  Unless a policy’s provisions explicitly provide for notice to a party also listed as the certificate holder on the certificate of insurance, the insurer is not obliged to notify that party.”

Unfortunately for agents and brokers, however, many municipalities, large contractors, and other typical certificate holders refuse to accept the new certificate precisely because it effectively eliminates notice to them of policy cancellation.

“Many producers fear that if they fail to modify the ACORD form to reinstate the notice provision they will lose sizeable accounts to other producers who will make the promise,” said IBA West General Counsel Steve Young.  “Yet ACORD takes the position that its copyright does not permit producers to continue using outdated forms, or to alter the new forms, and agency management software systems typically automatically include only the latest ACORD forms when they provide software updates.”

Other states, through legislation or regulatory action, have enacted new requirements in response to these problems that legally prohibit any person from requesting or providing a certificate of insurance in any form that has not been given prior approval by the regulator.  The IBA West task force will consider, among other issues, whether such legislation should be introduced in the 2011 California Legislature.

The Independent Insurance Agents and Brokers of America (IIABA) has published a comprehensive analysis—authored by Bill Wilson, of IIABA’s Virtual University—on these issues, which appears in under Current News on the IBA West website.