Certificates of Insurance…Or How I Got a Job in the Prison Laundry

As best as I can recall, the first article I wrote about certificates of insurance (COIs) was in 2002, over two decades ago. For the next four years, I wrote more on that subject than any other property/casualty issue, culminating with the publication of a white paper in January 2007. That white paper is still available by searching for “Certificates of Insurance Resources” at IndependentAgent.com.

Following the publication of that white paper, the Big “I” offered a three-hour webinar in 2007 attended by about 3,000 industry professionals over several broadcasts. This article shares the title of that original webinar. The webinar was updated and presented again in 2010 and 2013. In the years following that, it seemed that the entire issue, for the most part, had settled down. The last seminar or webinar in which I discussed COI issues was 2017.

I believe the last time I addressed a certificate of insurance issue in this Insurance Journal column was at least four years ago. However, increasingly in the past year or so, I’ve received quite a few inquiries about COIs, with many of the questions being identical to those from 20-plus years ago. Perhaps this is due to a new generation of industry personnel, as well as a new generation of contractors, lenders, etc.?

While I retired from the Big “I” at the end of 2016, I still serve as a volunteer faculty member on their Virtual University (VU) and get questions from their member agents almost daily. In late April, the VU faculty received the inquiry below from a Michigan agent.

“We are in the process of launching a client portal for our commercial clients where they have the ability to re-issue previously issued Certificates of Liability Insurance (ACORD 25) and issue new certificates for holders, as well. The program we are using [name of online system redacted] allows us to give them access to ‘free form’ the summary portion of the Description of Operations.

“If a client issues a certificate through that portal, we are notified and able to track who issued it as well as what language they put in the Description of Operations field. The goal is to teach clients to only put job numbers, location addresses, or the like in that field so they can satisfy requestor requirements.

“There is a chance, though, that they could instead write in other things such as stating Additional Insured status is granted, Waivers of Subrogation provided, etc. My question is whether our agency would be at risk from an E&O standpoint if a client wrote language on a certificate that is not true and a claim occurred.

“Since it’s trackable that they are the ones who wrote it instead of us, that is what leads me to question if we could avoid being held at fault.”

After retiring from the Big “I” at the end of 2016, I started blogging from my website at InsuranceCommentary.com. I wrote a COI article in 2017 called “Should Customers Be Able to Modify Certificates of Insurance” and an article in 2021 called “Beware of Online COI Systems.” Both of those articles address issues raised by the aforementioned Michigan agent that I’ll summarize here.

First, as for the agency’s potential for an E&O claim, if the customer puts information on the COI that isn’t accurate, only a qualified attorney can answer that question definitively. My non-legal expert opinion is…yes, yes, yes, yes, yes. And I suspect your liability could extend to the customer, the COI requestor, the customer’s (and your) insurers, and other parties such as additional insureds or potentially even the public as claimants.

But, aside from the professional liability exposure, there are other issues. All but a few states now have statutes, regulations, or insurance department directives prohibiting a COI from including any information that conflicts with what the policy forms provide. Noncompliance with these lawful orders can result in loss of license, fines, or worse.

Note that the ACORD 25 references an “Authorized Signature” for the issuer of the COI. Authorization is granted by the insurer(s) listed on the COI. Is your customer authorized by those insurers to issue, or complete in some way, COIs on their behalf?

The ACORD 25 Forms Instruction Guide (FIG) provides examples of “authorized representatives” as “producer, agent, broker, etc.” Does your agency/company contract and do related documents grant authority for a customer (or any unlicensed agency employee) to complete or issue a COI? The ACORD 25 FIG says, “The ACORD Certificate should be issued only in compliance with company instructions.”

As for the Description of Operations field itself, the ACORD 25 FIG says, “As used here, records information necessary to identify the operations, locations and vehicles for which the certificate was issued.” It says nothing about listing additional insureds, job numbers, or making any reference whatsoever to compliance with contracts or other information.

A few years ago, I heard from several Michigan agents about a large contractor in the state that was using a proprietary COI system and requiring the agents of subs of the contractor to upload COIs to this system while charging the agent $15 for this honor and privilege. The contractor’s construction contract allegedly required very specific additional insured wording on the COI, as well as a cancellation notice statement and an indication that coverage was provided for “Liability insurance including contractor’s obligations under the indemnification provisions of this contract.” No CGL policy covers all of a contractor’s obligations to indemnify.

In the specific question that generated this article, what’s to keep a customer from putting anything they want to in the Description of Operations field of the COI? Even if the agency is notified of this electronically, how soon can anyone act to review the statement. Consider how many certificates a large contractor could be issuing weekly. Is the agency staffed to monitor this activity, and can they do it quickly enough to intercept a problem COI before it’s received by the requestor? Highly unlikely.

Readers, what do you think?

Note that there is a Comments section for your feedback on this article. Is anyone using a system like this in this way? What is your experience? Are your staffs, especially newer hires, up to date on COI issues? Would you have any interest in a webinar on COIs from perhaps the Insurance Journal’s Academy of Insurance? Inquiring minds want to know.

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