Okay, it's more like three minutes. Sue me. Unless you're a member of my extended family. Please. I discuss the strange case of an aunt who sued her 12 year-old nephew, and why his parents' homeowners insurance didn't come through.
Question from an IIABNY member: Have a question about an 18 year old daughter of a divorced couple. She lives with her mother 70 percent of the time and her father 30 percent of the time. If she were involved in an accident as a passenger in another vehicle or as a pedestrian, would the coverage come from the mother’s policy? Would the coverage come from the policy where she was staying at the time of the loss? Would both policies respond proportionally? Any thoughts?
Answer: ISO endorsement PP 05 87 01 14, Personal Injury Protection Coverage – New York, states in relevant part:
Mandatory Personal Injury Protection
The company will pay first-party benefits to reimburse for basic economic loss sustained by an eligible injured person on account of personal injuries caused by an accident arising out of the use or operation of a motor vehicle or a motorcycle during the policy period and within the United States of America, its territories or possessions, or Canada.
Eligible Injured Person
Subject to the exclusions and conditions set forth below, an eligible injured person is:
(a) The named insured and any relative who sustains personal injury arising out of the use or operation of any motor vehicle;
(b) The named insured and any relative who sustains personal injury arising out of the use or operation of any motorcycle, while not occupying a motorcycle; …
When used in reference to this coverage: …
(g) "Relative" means a spouse, child, or other person related to the named insured by blood, marriage, or adoption (including a ward or foster child), who regularly resides in the insured's household, including any such person who regularly resides in the household, but is temporarily living elsewhere; …
Other Coverage. Where more than one source of first-party benefits ... is available and applicable to an eligible injured person in any one accident, this Company is liable to an eligible injured person only for an amount equal to the maximum amount that the eligible injured person is entitled to recover under this coverage, divided by the number of available and applicable sources of required first-party benefits. An eligible injured person shall not recover duplicate benefits for the same elements of loss under this coverage or any other mandatory first-party motor vehicle or no-fault motor vehicle insurance coverage issued in compliance with the laws of another state.
If the eligible injured person is entitled to benefits under any such mandatory first-party motor vehicle or no-fault motor vehicle insurance for the same elements of loss under this coverage, this Company shall be liable only for an amount equal to the proportion that the total amount available under this coverage bears to the sum of the amount available under this coverage and the amount available under such other mandatory insurance for the common elements of loss. However, where another state's mandatory first-party or no-fault motor vehicle insurance law provides unlimited coverage available to an eligible injured person for an element of loss under this coverage, the obligation of this Company is to share equally for that element of loss with such other mandatory insurance until the $50,000, or $75,000 if Optional Basic Economic Loss (OBEL) coverage is purchased, limit of this coverage is exhausted by the payment of that element of loss and any other elements of loss.
Based on this, we know that:
1) PIP coverage applies to “eligible injured persons”
2) An eligible injured person can be a “relative”
3) A child who regularly resides in the insured’s household and who temporarily lives elsewhere is a “relative”.
Therefore, it appears that the daughter you described could be an “eligible injured person” under both parents’ PIP coverage. If she were to be injured in a car accident, the Other Coverage condition would apply.
Assuming that both parents live in New York, the first paragraph of the condition would apply. That paragraph says that the insurer is liable “only for an amount equal to the maximum amount that the eligible injured person is entitled to recover under this coverage, divided by the number of available and applicable sources of required first-party benefits.” If there are two applicable policies (Mom’s and Dad’s), then the two insurers will share the loss 50-50. If the most she can collect under PIP is $30,000, and there are two sources of required first-party benefits, then each source pays $15,000 ($30,000 divided by two.)
Not long ago, a newsletter from an insurance agency landed in my email in box. The content in the newsletter appeared to be targeted at the agency’s personal lines clients. The article was all about coverage issues, which I think is a good thing. I’m all for trying to get insurance consumers to focus on the product they’re buying instead of how much they’re paying for it. The gecko and my gal Flo do plenty to emphasize the size of the premium. When independent insurance agents speak with their clients about coverage, they are doing the industry and the public a favor.
Unfortunately, this newsletter missed the mark. The more times I read it, the more I saw it as an example of what not to do. The author’s intentions were good; the execution was not. If your agency publishes a client newsletter, or regularly communicates with clients in some other way (which you should,) then here are some things to keep in mind:
Avoid using irrelevant terms. The article’s title was When is damage considered an act of God? It describes what it calls “Common Acts of God” exclusions. Are there common “acts of God” exclusions? I just did word searches in the following Homeowners policy forms:
The phrase “act of God” does not appear in any of them. In fact, the word “God” is not in any of them.
Why confuse the matter by using a phrase that’s not in the policy? It just makes people ask, “What do you mean by ‘act of God’?” Better to just say, “Your policy covers a lot of events, but it doesn’t cover everything. Here’s what you need to know.”
If it’s not something that will affect your clients, don’t bring it up. The article states:
"Losses from a hurricane or severe wind or hail storm are often covered by insurance (except for losses associated with flooding), but there may be wind damage deductibles to mitigate the high risk from these catastrophic events.”
This is true on its face. However, this agency is located not far from Rochester. Its geographic area is hundreds of miles from the Atlantic coast. Its clients do not have a hurricane exposure. In addition, the New York State Department of Financial Services has approved insurers’ use of windstorm deductibles only in the Long Island counties, New York City other than Manhattan, and Westchester County. In short, this agency’s clients have to worry about neither hurricanes nor windstorm deductibles. If that’s the case, why mention them at all?
Lay off the industry jargon. After telling the reader that a Homeowners insurance policy may not cover “acts of God,” the author wrote:
"This is why it is important to check which perils are covered and which are excluded from your homeowners policy. In certain instances, you may purchase additional coverage for an excluded peril.”
Quick – call a friend or relative who does not work in the insurance industry. Ask him what “excluded” and “peril” mean in the insurance world. I can wait.
He didn’t know, right? “Excluded” and “peril” have special meanings in the context of insurance policies. Most clients do not speak insurance jargon. An agency that wants to communicate effectively with clients must meet them where they are. The author should have said, “This is why it is important to find out what causes of damage your homeowners policy covers and which ones it does not. In some cases, you may be able to buy extra insurance to cover more causes of loss.” Those are words the average person can understand.
I suspect that the agency licensed this article from a company that publishes newsletter articles. That would explain the mention of windstorm deductibles in an upstate newsletter. If your agency licenses ghost-written articles, review them carefully. In the end, it’s your newsletter, and you have the right to modify the content to suit your audience. If the license for the article does not allow you to do that, find another source of newsletter articles or write the articles yourself.
Newsletters are a great way to build relationships with your clients. Well-written articles can educate and enlighten consumers about products that most of them find mysterious. Poorly-written articles may raise more questions than they answer. Keep your articles short, clear and easy for non-insurance people to understand. They might just prevent some confusion when someone makes a claim.
Photo by Katie Thebeau. Used under a Creative Commons Attribution 2.0 license.
Gather ‘round, young Jedis, for another lesson in why insurance is not a commodity. Today’s tale involves a Homeowners policy, a named insured who complicated matters by not living anymore, some stuff that went missing, and two words.
Our story begins and ends in the burg of Mineral Wells, Texas, where Mr. J.O. Spurlock owned and occupied a home. His Homeowners policy, issued by Beacon Lloyds Insurance Company, listed only him as a named insured. It identified his street address as the “residence premises/dwelling” and provided dwelling and personal property coverage. (Note: Beacon Lloyds dissolved at the end of 2012.)
Mr. Spurlock passed away in early 2009, midway through the policy term. A court appointed Kelly Spurlock as the representative of Mr. Spurlock’s estate. The month before the policy’s expiration, Kelly discovered that some of the personal property was missing from the house. Believing the items to have been stolen, he filed a claim with Beacon Lloyds. The insurer concluded that the insurance did not apply to the stolen property. It denied coverage.
Kelly then sued the insurer and the agent who obtained the policy for Mr. Spurlock. The trial court dismissed the case against both parties, and Kelly appealed. Here’s where the policy language gets interesting.
The ISO Homeowners 3 Special Form, HO 00 03 05 11, contains a “Death” condition which states:
“If any person named in the Declarations or the spouse, if a resident of the same household, dies, the following apply:
1. We insure the legal representative of the deceased but only with respect to the premises and property of the deceased covered under the policy at the time of death; and
2. ‘Insured’ includes:
a. An ‘insured’ who is a member of your household at the time of your death, but only while a resident of the ‘residence premises’; and
b. With respect to your property, the person having proper temporary custody of the property until appointment and qualification of a legal representative.”
However, the Beacon Lloyds policy did not use the ISO form. Its policy had a slightly different “Death” condition, as quoted in the appellate court’s opinion:
“If the named insured dies, we insure:
a. the named insured's spouse, if a resident of the same household at the time of death.
b. the legal representative of the deceased. However, if this legal representative was not an insured at the time of death of the named insured, this policy will apply to such legal representative only with respect to the premises of the original named insured.
c. any person who is an insured at the time of such death, while a resident of said premises.”
Did you catch the difference there? The ISO form covers the legal representative for “the premises and property of the deceased.” The Beacon Lloyds form covered the legal representative with respect to “the premises.” No mention of “the property.”
The appellate court checked dictionary definitions of “premises” and found that the term means “a house or building and the grounds upon which the house or building is located.” Using this as the starting point, the court said:
“None of the above definitions includes ‘personal property’ in the definition of ‘premises.’ Accordingly, we conclude that the plain meaning of ‘premises’ as used in the Beacon policy is unambiguous and does not include personal property. Based on its plain meaning, the undefined term ‘premises’ in the Beacon policy includes J.O. Spurlock's house and the grounds upon which it was located. The Beacon policy insured the legal representative of the named insured only with respect to the ‘premises’ of the original named insured. Given the ordinary meaning of ‘premises,’ we conclude that, upon J.O. Spurlock's death, the policy provided dwelling coverage to Spurlock but did not provide personal property coverage to him, whether the loss of personal property occurred on or off the premises.”
ISO covers “the premises and property”; Beacon Lloyds covered “the premises”. The deletion of two words made the difference between whether this claim was covered or denied. The court ruled that coverage did not apply to the stolen personal property, and it threw out the allegation of negligence against the agent.
I just did a word search of the court’s opinion. Two words that are conspicuously absent from the opinion are “premium” and “price.” That’s because, when a loss occurs, nobody cares about the price of the policy.
Two words. Without them, no coverage. Insurance policies are not all the same. Price is an important consideration, not the most important consideration.
I’ll have more examples in the near future. I don’t know what they are yet, but I know they’re out there. In the mean time, I strongly encourage you to study the products you’re offering. It’s best for you and for your clients.
Okay, so I unintentionally took September off from the blog, but I’m back now. This is a continuation of my series on how insurance policies are not alike (see my posts on May 5
and May 6
). The following is an email discussion I had with a Westchester County agent last August. I’ve edited it slightly to remove extraneous detail and to leave the insurer anonymous.
Question: One of our clients recently took delivery of some heavy equipment and asked if there would be coverage for his property if the floor collapsed. Our client is the tenant, not the building owner. The coverage form is the (insurer’s) Special Property Coverage Form, which we believe is the same or almost the same as the corresponding ISO form. I have attached a page from the (insurer’s) policy. Coverage is clear with respect to building damage for collapse caused by weight of people of personal property, but I can’t make sense out of the personal property wording. Do you feel that personal property owned by a tenant of a building would be covered if the building were to collapse due to weight of personal property?
Answer: I do not think this policy will cover damage to your client’s equipment caused by a collapse. There is a very significant difference between the language in this policy and the language in the ISO Causes of Loss – Special Form. Here is what this policy says:
"We will pay for direct physical loss or physical damage caused by or resulting from risks of collapse of a building or any part of a building that is insured by this policy caused only by one or more of the following…”
And here is what ISO says:
“We will pay for direct physical loss or damage to Covered Property, caused by abrupt collapse of a building or any part of a building that is insured under this Coverage Form or that contains Covered Property insured under this Coverage Form, if such collapse is caused by one or more of the following…”
ISO’s form will pay for damage to covered property caused by the collapse of a building that contains covered property insured under the form. The insurer's form does not say anything about insuring a collapse of a building that contains covered property. It states only that it covers damage caused by the collapse of a building insured by the policy. To me, this means the following:
If the insurer had intended the collapse coverage to be the same as the ISO form’s, it would have used ISO’s language in its entirety. Much of the rest of the wording is identical to ISO’s. I can only conclude that the intent is to not cover damage to property caused by the collapse of a building that is insured under another policy.
I hope the underwriter will consider endorsing the policy to remove this coverage gap. Your client is obviously concerned about it.
Over this past weekend, the New York Times ran a rather unflattering article about the employment practices at Amazon.com. Titled Inside Amazon’s Thrilling, Bruising Workplace, the article by Jodi Kantor and David Streitfeld described an atmosphere that borders on slave-driving and cruel. They wrote about employees receiving emails after midnight and follow-up text messages when the recipients fail to respond. They quoted an employee who said nearly every person he worked with cried at their desks at some point.
Some of the other highlights: “Marathon” conference calls on Easter Sunday and Thanksgiving; anonymous negative feedback from co-workers through an automated tool that management encourages employees to use; forced ranking of employees; an employee whose performance reviews suffered when she cut back her hours to care for her dying father; a woman who was sent on a business trip they day after she miscarried twins; and employees put on “performance improvement plans” after experiencing serious health problems. A former employee was quoted as repeating a saying that allegedly went around the work campus: “Amazon is where overachievers go to feel bad about themselves.”
According to The Times’ Web site, readers have submitted more than 4,000 comments about the story. Some inside the company have labeled it a hatchet job. Nick Ciubotariu, an Amazon department head, wrote a passionate response on LinkedIn Pulse. “(I)f Amazon was the type of place described in this article,” Ciubotariu wrote, “I would publicly denounce Amazon, and leave.” He labeled several of the article’s claims as “completely false.” Others he called normal corporate practices that the authors portrayed as sinister. As to some of the harshest stories, he responded:
“During my 18 months at Amazon, I’ve never worked a single weekend when I didn’t want to. No one tells me to work nights. No one makes me answer emails at night. No one texts me to ask me why emails aren’t answered. I don’t have these expectations of the managers that work for me, and if they were to do this to their Engineers, I would rectify that myself, immediately. And if these expectations were in place, and enforced upon me, I would leave.”
He does acknowledge that Amazon might have been the way it was described in the article before he arrived, but “that Amazon no longer exists.”
Why am I writing about this on an insurance blog? Because, good InsuranceGeek™ that I am, I immediately thought about the insurance implications of this story. [Sidenote: Regular readers of this blog know that everything is about insurance.] These are the risks and coverages that immediately sprang to mind:
Employment practices liability. Boy howdy, is this one important. Amazon is a huge corporation with billions of dollars in assets. They can self-insure a lot of EPL claims (and probably have over the years.) Small to medium size companies with more limited resources could be crippled without EPLI coverage for some of these claims. Exhibit A: “A woman who had thyroid cancer was given a low performance rating after she returned from treatment. She says her manager explained that while she was out, her peers were accomplishing a great deal.” First, no manager with an ounce of empathy and conscience should treat an employee this way. Second, any manager who did would be exposing the employer to lawsuits, and the employer better have EPLI coverage in place to pay for it.
Workers’ Compensation. The article alleges that working at Amazon literally made some people ill. Openly weeping at one’s workstation may be a sign of mental distress (he said, disclosing his grasp of the obvious.) And then there’s this: “One ex-employee’s fiancé became so concerned about her nonstop working night after night that he would drive to the Amazon campus at 10 p.m. and dial her cellphone until she agreed to come home. When they took a vacation to Florida, she spent every day at Starbucks using the wireless connection to get work done…’That’s when the ulcer started,’ she said.” Any workplace with an environment like that is just begging for high Workers’ Comp costs.
Personal and Advertising Injury Liability. Most commentary about Commercial General Liability Insurance focuses on Bodily Injury and Property Damage Liability Coverage. However, for some organizations, P&AIL coverage is just as important. One of the covered offenses in the ISO CGL coverage form under Coverage B is, “Oral or written publication, in any manner, of material that slanders or libels a person or organization or disparages a person's or organization's goods, products or services.” A few things worth noting:
I’m neither attorney, judge nor jury, and I’m not qualified to say whether The Times libeled Amazon in its article.
The ISO CGL coverage form excludes coverage for this particular offense if committed by an insured whose business is broadcasting or publishing. Such organizations need media professional liability coverage.
That said, another organization lacking The Times’ reputation, history and clout that made similar accusations about a business could find itself on the receiving end of a libel lawsuit. This is where P&AIL coverage becomes extremely important, particularly the definition of “personal and advertising injury” and any exclusions in the policy that go beyond those in the ISO form.
Reputational risk. I don’t know of an insurance coverage that addresses this risk, but apparently it’s one on the minds of a lot of people. The day before The Times published its story, Best’s News Service published excerpts from a video interview with Rory Moloney, the CEO of Aon Global Risk Consulting in Dublin, Ireland. “In terms of what's hot and what's not, probably one of the most interesting things was that damage to reputation and brand became the number one risk this year…,” Moloney said. “We think this has a lot of implications for the risk community overall in if you think about damage to reputation and brand as an aggregation essentially of a lot of other exposures.” This may be an uninsurable risk; companies may have to manage the risk to their reputations through non-insurance methods. Still, I found the timing interesting, if coincidental. I’m pretty sure there are some people at Amazon headquarters today who, reading Moloney’s comments, are saying, “Preaching to the choir, bro.”
I don’t know anyone who works for Amazon, and I don’t know if The Times pulled back the curtain on a dysfunctional work environment, or if it maligned a reputable company, or some of both. My point is that any organization could find itself accused of these things. If you’re an insurance professional, this story is worth discussing with your commercial clients. They may be the finest of citizens, but one rogue manager or one ex-employee with an attitude may be all it takes to embroil the company in a nasty and potentially uninsured legal action. As insurance professionals, we are called to help people protect themselves. If we can help our clients survive employee lawsuits and allegations of libel, then we can go home at night knowing we did our jobs. And we won’t even have to respond to emails and texts that arrive after Jimmy Fallon signs off for the night.
I learned earlier today that the New York State Department of Financial Services has disapproved ISO's filing of endorsements to address the "where you reside" issue. Correspondence in the filing expressed concerns about whether, under some carriers' underwriting guidelines, the endorsements might reduce coverage. The examiner also felt that it was unclear how carriers would interpret them, given the varying underwriting guidelines.
We at IIABNY will discuss this decision and what, if anything, we should do next. For now, though, the ISO Homeowners insurance program will maintain the status quo on October 1.
NPR's excellent Planet Money podcast recently did a show about how we as humans become comfortable with frightening technology. Did you ever wonder why elevators used to have operators in them? It's because, once upon a time, people didn't fully trust elevators and they wanted someone there to take control if necessary.
The hosts discuss this in the context of the Google driverless car. Since that is a technology that will have a major impact on all of us who work in the insurance industry, I think you'll find it worth your time to give this 16 minute episode a listen. Will we ever become comfortable with the idea of a car that no person is driving? The thought scares me witless. Before you say "ABSOLUTELY NOT", though, consider the story they relay about the Air France crash in 2009. There are few things in life that human intervention can't make a little bit worse.
Listen to the podcast and sound off in the comments about what you think.
Photo by Corrie Barklimore. Used under a Creative Commons Attribution 2.0 license.
I have returned this morning from 11 days off. I spent a few days in the Thousand Islands region with some college friends, spent a week with my family on the Jersey Shore, played golf badly, coated myself with SPF infinity sunblock and sat on the beach, read a bunch of books, and pretty much forgot about insurance for two weeks. Today, I bear a striking resemblance to the picture displayed above.
Nevertheless, it's a new dawn, it's a new day ... sorry, lapsed into song for a minute there. But it is a new day, because New York's law governing the use of certificates of insurance took effect one week ago today (I celebrated by taking a nap on the beach in Ocean Grove, NJ.) Accordingly, the questions from IIABNY members have been coming in fast and furious in my absence. There is one question that we've gotten from all corners of the state, so I think it's worth addressing in an addendum to my earlier post about the myths surrounding the law. The following email from a member is representative:
"Could you please let me know if the new law also extends to Disability and Workers’ Compensation certificates of insurance? We are wondering if the DB120.1 and C105.2 certificates are still valid forms to use. They are not on the list of approved forms."
The answer to this question is in the new Section 502 of the New York Insurance Law. It states in part:
"In this state:
(a) With respect to a certificate of insurance evidencing that a policy provides personal injury liability insurance or property damage liability insurance, as defined in paragraphs thirteen and fourteen of subsection (a) of section one thousand one hundred thirteen of this chapter, no person or governmental entity shall wilfully require, as a condition of awarding a contract for work, or if a contract has already been awarded as a condition for work to commence or continue under the contract, or if the contract has been performed or partially performed as a condition for payment to be made under the contract, the issuance of a certificate of insurance unless the certificate is:
(1) a form promulgated by the insurer issuing the policy referenced in the certificate of insurance; or
(2) a standard certificate of insurance form issued by an industry standard setting organization and approved for use by the superintendent or any other form approved for use by the superintendent."
This means that a person or organization may not retaliate against another for failing to provide an unapproved certificate form. However, note the words in italics - the prohibition applies only to certificates that evidence a policy that provides liability insurance.
The text references New York Insurance Law Section 1113, which defines the types of insurance that can be provided in this state. Paragraphs 13 and 14 of subsection (a) of that section define personal injury liability insurance and property damage liability insurance. There is an entirely separate paragraph (paragraph 15) that defines workers' compensation and employers' liability insurance. Another paragraph (paragraph 3) states that statutory disability insurance is a type of accident and health insurance. The certificates law does not mention either of these paragraphs.
Since the certificates law specifically references the definitions of liability insurance but not the definitions of workers' compensation or accident and health insurance, I think it is clear that the legislature did not intend for the prohibition in Section 502(a) to apply to workers' compensation and disability certificates. Thus, project owners are free to retaliate against third parties who fail to provide these types of certificates, regardless of whether the New York State Department of Financial Services has approved them.
I get a lot of calls about troublesome certificate forms (I actually received one while in the process of creating this post). However, I almost never get complaints about the workers' compensation certificates. They don't seem to be the forms that are causing problems for producers.
Bottom line: Yes - third parties may still require the C-105.2 and DB-120.1 certificate forms; and no - the forms do not have to be approved by the DFS.
Image by Brenda Clarke. Used under a Creative Commons Attribution 2.0 license.
In just 18 days, New York’s certificates of insurance law will take effect. The New York State Department of Financial Services has posted an initial list of certificate forms it has approved. We are getting closer to a huge relief for New York insurance producers.
Judging from the emails and questions I’ve been getting, though, there seems to be a fair amount of misunderstanding out there about what this law says and does. So, let’s take a few minutes to dispel some myths.
Myth #1: The law puts new restrictions on what insurance producers can do with certificates.
The truth: Until now, producers have been guided by a pair of circulars issued by the DFS back in the 1990’s. Here’s the major point:
Licensed producers are advised that they may not add terms or clauses to a certificate of insurance which alter, expand or otherwise modify the terms of the actual policy unless authorized by the insurer which has filed an appropriate endorsement with the Superintendent of Insurance and obtained prior approval, if required.
Now, here is what the new New York Insurance Law Section 502 says:
A certificate of insurance shall not amend, extend, or alter the coverage provided by the insurance policy to which the certificate of insurance makes reference. A certificate of insurance shall further not confer to any person any rights beyond those expressly provided by the policy of insurance referenced therein.
There’s not a whole lot of difference there. The second sentence is pretty close to what the ACORD 25 Certificate of Liability Insurance says in its header. The fact is that this law does not place any restrictions on producers that weren’t there before.
Myth #2: Certificates that are not approved by the DFS are illegal.
The truth: Nuh-uh. Saying that a particular act or document is illegal implies that someone can be punished for using it. There is nothing – NO-THING – in the law that makes it a crime to ask for or issue a certificate form that the DFS has not approved.
Rather, an entity that wants its own unapproved form has no leverage over the insured. Section 502 also says this:
In this state:
(a) With respect to a certificate of insurance evidencing that a policy provides personal injury liability insurance or property damage liability insurance, as defined in paragraphs thirteen and fourteen of subsection (a) of section one thousand one hundred thirteen of this chapter, no person or governmental entity shall willfully require, as a condition of awarding a contract for work, or if a contract has already been awarded as a condition for work to commence or continue under the contract, or if the contract has been performed or partially performed as a condition for payment to be made under the contract, the issuance of a certificate of insurance unless the certificate is:
(1) a form promulgated by the insurer issuing the policy referenced in the certificate of insurance; or
(2) a standard certificate of insurance form issued by an industry standard setting organization and approved for use by the superintendent or any other form approved for use by the superintendent.
All of the prohibitions stated in this provision apply to those who require certificates of insurance, not to the producers who issue them. Also, the language does not prohibit asking for a non-approved form. It says that the requestor cannot retaliate against the insured for failing to produce it. This law gives you (the producer) the ability to tell a certificate requestor to bug off, and you don’t have to worry about the requestor retaliating against your client. That’s the really valuable change it makes. If someone requests a non-approved certificate, and you say no, and that person kicks your insured off the job site, then he is subject to a fine.
Myth #3: The agent can be fined for issuing a non-approved certificate form.
The truth: Nuh-uh again. As the language quoted above shows, nothing prohibits an agent from issuing a non-approved form. From a practical standpoint, I can’t imagine why a producer would want to issue such a certificate (the whole point of the law was to get that off producers’ backs), but it’s just incorrect for producers to think they’ll get fined if they issue a cert that’s not on the list. ACORD always urges issuers to use the most current editions of their forms because they make changes to reflect the laws in all 50 states, and they don’t support outdated forms. Therefore, both the DFS and ACORD would tell you that your best bet is to use the editions on the list.
Essentially, producers have the legal ability to issue any certificate form if 1) it doesn’t change the insurance coverage in any way; and 2) the insurer has authorized its use. This doesn’t mean they have to issue it (most of the time, they won’t want to.) It means that they can legally do it.
Myth #4: Certificate holders can no longer request wording on a certificate that is not on the policy.
The truth: They can ask, but they can’t require. Here’s Section 502 again:
(b) No person or governmental entity shall wilfully require the inclusion of terms, conditions or language of any kind, including warranties or guarantees, that the insurance policy provides coverage or otherwise sets forth terms and conditions in a certificate of insurance, if the insurance policy referenced by such certificate of insurance does not expressly include such terms, conditions, or language. This subsection shall not prohibit any person or governmental entity from including minimum insurance requirements, coverage limits, terms, or other conditions in the solicitation of bids as part of a competitive process, and it shall not prohibit any person or governmental entity from requesting, or an insurer or insurance producer from responding to such a request with, clarification regarding the terms of the policy, or endorsement thereto.
They’re free to ask for it, but once they’re told it’s not possible, they can’t kick the insured off the job site solely because of the certificate. If the insured signed a contract in which he promised to carry certain coverage and he doesn’t have it, he could be in breach of contract, but that’s an issue separate from the certificate. Any project owner can still say, “You have to name me as an additional insured.” They cannot keep someone off a job site simply because a certificate does not say, “The People of the State of New York and all of their European, Asian, African and interplanetary ancestors are additional insureds.”
The law does not place new restrictions on producers. Rather, it gives them a new ability to say no to unreasonable requests. There is now recourse against those who won’t take no for an answer. And that is what makes this law valuable to producers.