At first glance, insurance certificates look fairly transparent and uncomplicated. But in actual practice, the process of drafting one often turns out to be more onerous than you think.
The purpose of an insurance certificate is to confirm that a real insurance policy exists. The certificate needs to also accurately show the coverage that is being provided.
Ideally, each certificate and its attendant contract would be examined by an attorney. The attorney would then recommend any changes necessary in the actual policy coverage in order to comply with the coverage stipulated in the contract. These changes would then be made available to the client’s broker, who would acquire the applicable coverage. But, often attorneys do not become involved until later in the process, or are left out of the process entirely.
Under these circumstances, what can brokers do to help the clients as much as possible? Here are a few thoughts.
Instead of having an attorney look at conditions of coverage to determine if they comport with the contract, the client will send the contract to their insurance broker to examine. In situations like these, it often turns out the same person issuing the certificate is doing the contract review. So, it would best serve the interests of the client to have a second person with the requisite expertise also look at the initial analysis as a safeguard to avoid errors.
After the review, the broker can talk with the client about errors or omissions, such as additional insured wording, waivers of subrogation, primary and noncontributor wording, notice of cancellation provisions, coverage deficiencies and coverages not provided in the market.
The broker needs to make clear, however, they are not offering legal advice.
Sometimes, clients agree to a contract before it has been reviewed either by an attorney or a broker. A valid contract may already be in effect when the broker receives either a request for a certificate of liability insurance or a copy of the contract itself.
In the first instance, the broker may not be aware of the terms of the contract when he issues the certificate describing the actual coverage, and as a result, the certificate may be rejected because it does not align with the language in the contract. When this happens, the client will give the contract to the broker, who will then be able to match the policy – the coverage and limits – with the terms in the contract.
So, it is in the best interest of clients to always have an attorney review the documents. Barring that, the broker should review the contract to determine how the contract matches up with the policy coverage.
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