E&O Tips for Avoiding Claims Related to Certificates of Insurance

E&O exposure can be created by anyone in the agency, including owners and managers, producers and CSRs. Each month, I will share some easy-to-use tips targeted at different positions to help reduce E&O exposure in your agencies. Sharing these with all agency staff can raise everyone's awareness of how to prevent claims, and open a dialog throughout the agency about improving business processes. I hope you find these helpful and welcome your suggestions on any specific E&O topic you would like us to address.

• Provide your client with a disclaimer at the beginning of your business relationship. The disclaimer should include an understanding that your agent can and will only provide current and accurate information on certificates.
• Minimize the review of contracts for your insured and use a disclaimer indicating that contract reviews should be conducted by the client’s legal counsel.
• Proofread all certificates and perform periodic quality control reviews. Certificates should be reviewed periodically as part of the agency’s overall quality control program including verifying that additional insureds are properly added.
• Establish a procedure for handling certificates. The agency procedures should be based on agency/company agreements, taking into consideration any state laws and regulations. Follow the Invariable Practice approach which is one way all the time for everyone.
• Always send the certificate holder the entire certificate including the disclaimer language.
• Send copies of all issued certificates to the identified carrier(s). From an E&O standpoint, agents are encouraged to provide copies to carriers. The ACORD form indicates that the insurer "will endeavor to provide notice of cancellation". It is impossible to do so without knowing that the certificate exists.
• Use the correct coverage form to fulfill certificate requests. Check with the carrier to see what edition dates of forms are being issued in each state to see that the coverage certified is uniform and in compliance with the coverage requirements of the certificate holder, particularly if that party is a multi-state or national business.
• Document who requested the certificate and what was requested.
• Never exceed your legal or contractual authority. State regulations may require a statement that a certificate neither affirmatively nor negatively amends, extends nor alters the coverage afforded by the policy. The agency should never exceed it’s authority to issue certificates or bind coverage in violation of agency/company agreements.
• Never modify an ACORD certificate other than completing the questions and fields on the ACORD forms. The documents cannot be modified in any way without the advance consent of ACORD. Modifications could be construed as violations of copyright law and any changes that are not filed as required could violate statutes and regulations.
• ACORD forms have been extensively tested in the court system and agents should not issue a non-ACORD certificate without the Insurer’s approval.
• Certify only coverages that are in place at the time the certificate is being generated. Only after coverage changes have been made, not simply ordered, should certificates be issued.
• Never issue or sign certificates on policies issued by alternative markets such as surplus lines and MGAs. Certificates should be requested directly from the wholesaler. Or at least have specific written authority from the wholesaler to issue certificates on their behalf with confirmation from the issuing carrier that the wholesaler has the ability to authorize producers to issue certificates.
• Do not include descriptions of coverage in the description section that are broader than the underlying coverage.
• Never issue certificates for a fee basis on behalf of another agent or agency.
  

Linda S. Loving, CIC, AISM, AIAO (lloving@iiav.com), VFSC Executive Vice President

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Independent Insurance Agents of Virginia