Dec. 18, 2015 — The New York State Department of Financial Services has told IIABNY that, where a liability insurance policy contains an automatic or blanket additional insured endorsement, certificates of insurance may name specific additional insureds, but only if the certificate refers to the endorsement.
IIABNY reported on Dec. 14 on an email message we had received from a department attorney regarding New York's new certificates of insurance law. That email said:
"An insurance agent may not issue a certificate of insurance that lists the names of specific additional insureds when the policy referenced provides automatic coverage for additional insureds through a blanket or automatic additional insured endorsement. In addition, an entity may not require the insurance agent to list the names of specific additional insureds on the certificate of insurance in such a situation."
The attorney's email was in response to an IIABNY request for clarification. Several IIABNY members have contacted us since last summer asking this question. IIABNY's question prompted an important clarification from the department, one that saved agents and brokers from potential E&O claims and sanctions from the DFS. What certificate holders were asking for was a violation of the law.
After hearing from a significant number of IIABNY members, we went back to the department for a different answer. Members argued that certificate requestors would reject certificates that did not list them as additional insureds, causing greatly increased workloads for agents and expense for their clients. We sent a follow-up question to the attorney who sent the original email, suggesting an alternative approach for handling additional insureds on certificates, one that would comply with the law while making members' lives easier. This morning, the attorney responded with the following message:
"In a situation in which the policy referenced in a certificate of insurance provides automatic coverage for additional insureds through a blanket or automatic additional insured endorsement, it would not violate Insurance Law section 502 if an insurance producer includes on a certificate of insurance language such as:
- 'Named Entity is an additional insured to the extent covered by the CG 20 33 ADDITIONAL INSURED – OWNERS, LESSEES OR CONTRACTORS – AUTOMATIC STATUS WHEN REQUIRED IN CONSTRUCTION AGREEMENT WITH YOU endorsement';
- 'ABC Company is an additional insured if required by written contract, per endorsement number XX XX XX (copy attached)'; or
- 'ABC Company would be covered as an additional insured per endorsement X , to the extent provided therein.'"
In a separate email, the attorney noted that the department had received questions from producers and provided these answers to some of those questions:
- "Can we check the Additional Insured box on an Acord 25 Certificate of Insurance (2014/01) with a 'Y' if there is a blanket additional insured endorsement? Yes.
- Does this apply only to New York Domiciled clients/customers? So, for our PA and CT offices or if we have clients domiciled in other states this does not apply. It applies when the person or governmental entity requesting the certificate is in New York State.
- Can we list/reference the blanket endorsement in the description of operations / locations / vehicles? Yes."
IIABNY strongly recommends that all agents and brokers follow these DFS guidelines when they issue certificates of insurance. The department has acknowledged marketplace realities and interpreted the law in a way that should satisfy the needs of certificate requestors, producers and their clients. However, it remains the law that certificate requestors may not require certificates to contain provisions pertaining to coverage if the policies themselves do not contain those provisions. Also, it has been department policy for many years, and it is now the law, that producers may not use certificates to change insurance coverage or grant any rights that the policies do not provide. The messages from the DFS clarify that law; they do not change it.
Also, to avoid errors and omissions claims, producers should take great care with the information they enter on certificates. E&O defense attorneys Jim Keidel and Chris Weldon have reported that nearly half of all new E&O claims involve certificates. In the April 2015 issue of IIABNY's The E&O Report, attorney Stephen Cunningham wrote:
"Although the new law provides additional protections when certificates are being issued, prudent insurance agents and brokers should not only follow the new law but also continue to follow the best practices that we have recommended over the years regarding how to handle certificates of insurance.
First, be sure to use the most up-to-date ACORD Certificate of Liability Insurance form (ACORD 25 (2014/01).) Second, if you deliver a certificate of liability insurance to additional insureds via e-mail or other electronic means, if at all possible, include a copy of the policy with the certificate of insurance. The additional insured will then be on notice of the full terms and conditions of the policy, preventing a 'misunderstanding' as to the coverages provided by the policy."
Finally, we want to remind you of the resources available at www.iiabny.org/certificates, including resources for certificate requestors and a new handout that explains blanket additional insured endorsements for those who do not work in the insurance industry.
We at IIABNY greatly appreciate the willingness of the DFS and this attorney in particular to work with us on a resolution that protects the integrity of the law while permitting our members to do business as easily as possible. Thank you to you, our members, for keeping us aware of your challenges and for supporting us in our work.
Please continue to visit www.iiabny.org/certificates to find documents and resources that we will add in the future.