Compliance and Certificates of Insurance
In preparing for your annual review of your policies or internal audit, there are several things to consider. One housekeeping matter that should be near the top of your list is a review of the certificates of insurance you use. This is a document issued by an insurance company that describes coverage. A certificate of insurance is not an insurance policy or contract.[1] Under Georgia law, no matter how a document is titled, it will be considered a certificate of insurance when it “is prepared or issued by an insurer or insurance producer as evidence of property or casualty insurance coverage.”[2]
- WHY HAVE CERTIFICATES OF INSURANCE?
A client will often request a certificate of insurance when they need to provide a third party with a summary of coverage. Generally, a certificate of insurance will include the name of the insurance company, the policy number, the name and contact information of the insured person, the type of policy, coverage limits, and the effective time period of the policy. Certificates of insurance can be particularly helpful in industries that frequently use contracted labor, such as the construction industry.
A certificate of insurance may give the certificate holder notice of policy changes if supported by the underlying policy. If the certificate holder is named in the policy or endorsement and the underlying policy requires the insurer to provide notice, the certificate holder may have a “legal right to notice of cancellation, nonrenewal, or any similar notice.”[3] For example, a distribution contract could require that the distributor list the manufacturer as an additional insured on the insurance policy and the certificate of insurance of the distributor. This would enable the company producing the product to verify that the distributor is maintaining appropriate levels of coverage on their goods.
- WHAT RULES GOVERN CERTIFICATES OF INSURANCE?
Because a certificate of insurance is not an insurance policy, it cannot alter, amend, or modify the underlying coverage listed in the insurance policy.[4] A certificate of insurance is limited to the underlying insurance contract. It generally cannot reference an outside contract or agreement[5] other than the underlying insurance contract.[6] Georgia law specifically prohibits any person or insurance provider from “knowingly” preparing or issuing certificates of insurance containing “false or misleading information.”[7] Any violation of these rules could result in a violation of the Insurance Code.
- WHAT ARE ACCEPTABLE FORMS OF CERTIFICATES OF INSURANCE?
Georgia requires that any form of certificate of insurance must be approved by the Commissioner of Insurance before it can be issued.[8] The exception to this rule is using the standard forms from the Association for Cooperative Operations Research and Development or the Insurance Services Office.[9] The Department of Insurance or Commissioner’s officeill review the form you use for your certificates of insurance to determine if it “(1) is unjust, unfair, misleading, or deceptive, or violates public policy; (2) fails to comply with the requirements of subsection (d) of this Code section; or (3) violates any law, including any regulation adopted by the Commissioner of Insurance.”[10] The Commissioner of Insurance will also verify that the form, if provided for information purposes, contains the following statement:
This certificate of insurance is issued as a matter of information only and confers no rights upon the certificate holder. This certificate does not amend, extend, or alter the coverage, terms, exclusions, and conditions afforded by the policies referenced herein.[11]
If the form does not state that the certificate of insurance is provided solely for informational purposes, it must contain a statement similar to the following: “This certificate of insurance does not amend, extend, or alter the coverage, terms, exclusions, and conditions afforded by the policies referenced herein.”[12] Once a form is approved by the Commissioner of Insurance, you should not alter it. If the form is altered or modified, you may well be in violation of the Insurance Code, which could subject your agency to investigation and penalties.[13]
- CAN I USE NON-STANDARD TERMS IN THE CERTIFICATE OF INSURANCE?
A certificate of insurance cannot grant the certificate holder any new rights independent of the underlying policy.[14] Under Georgia law, a certificate of insurance cannot alter, amend, or extend the insurance policy that the certificate of insurance is based on no matter how it is drafted.[15] The Insurance Code also prohibits insurers from using the certificate of insurance to “affirmatively or negatively alter, amend, or extend the coverage provided by the policy of insurance to which the certificate makes reference.”[16] Insurers cannot issue a summary of an insurance policy to avoid the rules governing certificates of insurance. Insurers who seek to alter, amend, extend coverage through the certificate of insurance will be liable for violating the Insurance Code. If you are wondering if you can include non-standard language in your certificate of insurance, you should review the terms of the underlying insurance policy, contact the Department of Insurance, and contact an attorney before proceeding. You will be liable for violating the insurance code if you include non-standard language that is not approved by the Department of Insurance first. All forms for certificates of insurance must be approved by the Commissioner of Insurance before you use them.
- WHAT ARE THE PENALTIES FOR VIOLATING THE INSURANCE CODE RULES GOVERNING CERTIFICATES OF INSURANCE?
If you issue a certificate of insurance that violates the Insurance Code, it will automatically be “null and void and of no force and effect.”[17] Georgia grants the Commissioner of Insurance the power “to examine and investigate the activities of any person that the Commissioner reasonably believes” has violated the Insurance Code rules governing the issuance of certificates of insurance.[18] The Commissioner of Insurance may fine violators for an amount not to exceed $5,000.00 per violation.[19]
This article is not intended to provide “legal advice” on the issues discussed in it and does not create an attorney-client relationship. It is only for informational purposes. Please contact Slotkin Law Firm or another attorney who is knowledgeable in this area of the law about your specific situation before taking any action.
[1] O.C.G.A. § 33-24-19.1(j).
[2] O.C.G.A. § 33-24-19.1(a)(1).
[3] O.C.G.A. § 33-24-19.1(l).
[4] O.C.G.A. § 33-24-19.1(j).
[5] One exception to this statutory provision is a construction contract.
[6] O.C.G.A. § 33-24-19.1(k).
[7] O.C.G.A. § 33-24-19.1(g).
[8] O.C.G.A. § 33-24-19.1(b).
[9] O.C.G.A. § 33-24-19.1(e).
[10] O.C.G.A. § 33-24-19.1(c).
[11] O.C.G.A. § 33-24-19.1(d).
[12] O.C.G.A. § 33-24-19.1(d).
[13] O.C.G.A. § 33-24-19.1(b).
[14] O.C.G.A. § 33-24-19.1(j).
[15] O.C.G.A. § 33-24-19.1(j).
[16] O.C.G.A. § 33-24-19.1(g).
[17] O.C.G.A. § 33-24-19.1(m).
[18] O.C.G.A. § 33-24-19.1(o).
[19] O.C.G.A. § 33-24-19.1(n).