CERTIFICATES OF INSURANCE IN A NUTSHELL By Brent Wm. Primus, J.D.
n organization known as ACORD (Association for Cooperative Operations Research and Development) has developed several forms of certificates of insurance. The most common form of a certificate of insurance seen in logistics is the ACORD FORM 25: Certificate of Liability Insurance. Another ACORD Certificate touching the supply chain is FORM 22: Intermodal Interchange Certificate of Insurance. Certificates of insurance come into play when a customer of a transportation provider requires the provider to have certain types of insurance coverage with specified levels of coverage. The provider then uses a certificate of insurance to provide evidence that the required coverages are in place. The customer is then shown as the “certificate holder” on the certificate of insurance.
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Perhaps the most important thing to understand about insurance certificates is the disclaimer. In the ACORD FORM 25: Certificate of Liability Insurance the disclaimer states the following: This certificate is issued as a matter of information only and confers no rights upon the certificate holder. This certificate does not affirmatively or negatively amend, extend or alter the coverage afforded by the policies below. This certificate of insurance does not constitute a contract between the issuing insurer(s), authorized representative or producer, and the certificate holder. Certificates of insurance are governed at the state level, not the federal level. There is no legally prescribed form for certificates of insurance; however, all states require disclaimer language such as the above be in the certificate. These statutes and the language of the disclaimer mean that the certificate is a summary of certain policy provisions. Accordingly, if there is an error in the information contained in the certificate, it does not change the insurance; it just means the certificate is wrong. Another thing to be aware of is that at one time, certificates of insurance included a provision that the issuer of the certificate would endeavor to give notice to the certificate holder if one or more policies were to be cancelled. The ACORD Certificate previous to the amendment contained this language: “Cancellation: Should any of the above described policies be cancelled before the expiration
date thereof, the issuing company will endeavor to mail _____ days written notice to the below named certificate holder, but failure to mail such notice shall impose no obligation or liability of any kind upon the company.” However, as of October 1, 2010 (after a one-year interim period), the form now reads as follows: “Should any of the above described policies be cancelled before the expiration date thereof, notice will be delivered in accordance with the policy provisions.” This is the result of various states’ Attorney Generals commencing litigation against the ACORD saying that the provision to give notice is legally defective. This is because the policy holder can contact its agent and cancel its coverage at any time and, with the exception of automobile liability insurance policies for motor carriers, the insurance company is required to cancel the policy. Accordingly, it may be impossible to give any notice at all. The problem for certificate holders is that the policy provisions generally will not provide for giving notice to a certificate holder. Although the notice provision in certificates of insurance is long gone, shippers’ contracts still routinely call for certificates to provide 30 days’ notice of cancellation.
Brent Wm. Primus, J.D., is the CEO of Primus Law Ofﬁce, P.A. and the Senior Editor of transportlawtexts, inc. Join him at 8 am on September 20 for his PARCEL Forum session titled, “The 5 Most Important Things to Know about the Supply Chain.”