S3084-2013 - NY Senate Open Legislation - Relates to the issuance of certificates of insurance

Relates to the issuance of certificates of insurance and requires the issuance of a certificate of insurance as a summary or evidence of property or casualty insurance.

Sponsor: SEWARD / Co-sponsor(s): FARLEY, LARKIN
Law Section: Insurance Law / Law: Add Art 5 SS501 - 505, Ins L

S3084-2013 Actions

May 20, 2013: AMENDED ON THIRD READING 3084A
Mar 6, 2013: ADVANCED TO THIRD READING
Mar 5, 2013: 2ND REPORT CAL.
Mar 4, 2013: 1ST REPORT CAL.146
Jan 29, 2013: REFERRED TO INSURANCE

S3084-2013 Meetings

Insurance: Mar 4, 2013

S3084-2013 Calendars

S3084-2013 Votes

VOTE: COMMITTEE VOTE: - Insurance - Mar 4, 2013

Ayes (17): Seward, Carlucci, Flanagan, Golden, Grisanti, Lanza, Larkin, LaValle, Martins, O'Mara, Valesky, Young, Breslin, Espaillat, Kennedy, Stavisky, O'Brien
Ayes W/R (2): Parker, Peralta

S3084-2013 Memo

BILL NUMBER:S3084

TITLE  OF  BILL:    An  act  to  amend the insurance law, in relation to
certificates of insurance

PURPOSE: To establish standards for the proper issuance of  certificates
of  insurance  and  to authorize the department of financial services to
impose penalties against any person who violates the provisions of  this
article.

SUMMARY  OF  PROVISIONS: Section 1 adds a new article five to the insur-
ance law, which sets  forth  specific  standards  for  the  issuance  of
certificates of insurance.

Section  501  provides  for  definitions  of  the  terms  "certificate",
"certificate of insurance", "certificate holder",  "insurance  producer"
"insurer". "person", and "policyholder."

Section  502  sets  forth  prohibited  practices, including, altering or
modifying a certificate of insurance form, requesting the issuance of  a
certificate  of insurance that contains false or misleading information,
issuing a certificate of insurance that alters  the  terms  or  coverage
provided  by  the insurance policy, issuing an opinion letter or similar
document that is inconsistent with this section.  However, an accompany-
ing addendum with clarifying information is permissible.

Section 503 provides for the applicability of  the  provisions  of  this
section.  Section 504 provides for enforcement powers of the superinten-
dent.

Section 505 provides for rules and regulations  to  be  adopted  by  the
superintendent.

Section 2 of the bill provides for a 90 day effective date.

EXISTING LAW: Under current law, an insurance producer may not add terms
or  clauses  to a certificate of insurance which alter, expand or other-
wise modify the terms of the actual policy,  unless  authorized  by  the
insurer  which  has filed an appropriate endorsement with the Department
of Financial Services. The  department  may  take  disciplinary  actions
against producers that engage in this practice.

However,  those  parties  that  make  the request for a certificate that
alters the terms of the policy are not regulated by  the  Department  of
Financial  Services and the department has no authority to prohibit them
from demanding improper certificates of insurance.

Additionally, existing law does not define certificates of insurance  or
sets standards for forms.

JUSTIFICATION:   Insurance producers are often asked by their commercial
insurance clients to provide certificates of insurance to various  third
parties.  A certificate of insurance is commonly used in business trans-
actions as proof that a policy of insurance is in effect. It is a simple
document  that  merely  summarizes  the essential terms, conditions, and
duration of the contract of insurance that  is  in  effect  between  the
insured  and the insurer. Usually, the request for a certificate is made
by a party the insured has contracted with to provide services,  includ-
ing  city, state, and municipal agencies, public authorities, as well as
private contractors.

A problem has existed for many years where various  government  agencies
have  required, as a condition of doing business, that an insured supply
evidence of insurance on preprinted forms supplied by the agency.  These
forms often times alter, expand or modify the terms of the subject poli-
cy.  In  other  cases,  government  agencies  or private contractors may
demand that terms be added to the standard ACORD certificate  of  insur-
ance  form  which  do  not  appear in the insurance policy. For example,
requests are often made for the certificate to include  "hold  harmless"
agreements  or  other  clauses that alter the language of the policy, as
well as statements that the wording of the certificate will  control  in
the  event  of any inconsistency or conflict between the certificate and
the policy.

An insurance producer that is asked to provide these  types  of  altered
certificates may not legally do so. The Department of Financial Services
has made it clear that an insurance producer may not add terms or claus-
es to a certificate of insurance which alter, expand or otherwise modify
the  terms  of  the actual policy unless authorized by the insurer which
has filed an appropriate endorsement with the Superintendent  of  Finan-
cial  Services.  The  department  may seek disciplinary measures against
producers who do this.

Insurance producers are being placed in an untenable position.  If  they
do  not  comply with the request to issue an improper certificate, their
insurance client will not be allowed  to  perform  work  for  the  party
asking  for  the  certificate. Unfortunately, an insurance producer that
complies with the law and refuses to issue an improper certificate  will
often  lose the client, who will find another insurance producer willing
to ignore the law and issue the improper certificate.

The department has recognized this problem over the years and has issued
numerous opinions and two  circular  letters  on  this  topic  (Circular
Letter  8  (1995) and Circular Letter 15 (1997)). Circular letter 15 was
also issued to city, state, and  municipal  agencies  and  other  public
authorizes  and  corporate,  as  well  as  to producers. In the circular
letter, the department acknowledges that these government agencies  were
making  requests for improper certificates and advised insurance produc-
ers that they may not provide them.

Despite the department's efforts, government agencies continue to insist
upon certificates of insurance that do not merely  act  as  evidence  of
insurance, but seek to modify the terms and conditions of coverage.

This  bill  will remedy this problem by making it a violation of law for
any person to request the issuance of a certificate  of  insurance  that
contains  any false or misleading information. The bill gives the Super-
intendent of Insurance the authority to impose penalties  against  those
who violate the law, including any person who requests the issuance of a
certificate that does not comport with the requirements of the bill.

LEGISLATIVE HISTORY: S.4425-B of 2011-12

FISCAL IMPLICATIONS: None.

EFFECTIVE DATE: 90 days after it shall have become a law.

S3084-2013 Text

 S T A T E   O F   N E W   Y O R K
 
                                          3084
 2013-2014 Regular Sessions
 I N  SENATE
 January 29, 2013
 
 Introduced  by  Sens.  SEWARD, FARLEY -- read twice and ordered printed,
 and when printed to be committed to the Committee on Insurance
 

AN ACT to amend the insurance law, in relation to certificates of insur
 ance
 THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND  ASSEM
 BLY, DO ENACT AS FOLLOWS:

 

Section  1.  The insurance law is amended by adding a new article 5 to
 read as follows:

 ARTICLE 5
 CERTIFICATES OF INSURANCE
 SECTION 501. DEFINITIONS.
 502. PROHIBITIONS.
 503. APPLICABILITY.
 504. ENFORCEMENT.
 505. RULES AND REGULATIONS.
 

S 501. DEFINITIONS. FOR PURPOSES OF THIS SECTION:

 (A) "CERTIFICATE" OR "CERTIFICATE OF INSURANCE" MEANS ANY DOCUMENT  OR
 INSTRUMENT,  NO  MATTER  HOW  TITLED  OR DESCRIBED, WHICH IS PREPARED OR
 ISSUED BY AN INSURER OR INSURANCE PRODUCER AS EVIDENCE  OF  PROPERTY  OR
 CASUALTY INSURANCE COVERAGE. "CERTIFICATE" OR "CERTIFICATE OF INSURANCE"
 SHALL  NOT  INCLUDE  A POLICY OF INSURANCE OR INSURANCE BINDER, AND DOES
 NOT AMEND, EXTEND OR ALTER THE COVERAGE PROVIDED BY THE POLICY OF INSUR
 ANCE TO WHICH THE CERTIFICATE MAKES REFERENCE, AND IS SUBJECT TO ALL THE
 TERMS, EXCLUSIONS AND CONDITIONS OF SUCH POLICY.
 (B) "CERTIFICATE HOLDER" MEANS ANY PERSON, OTHER THAN A  POLICYHOLDER,
 THAT IS IDENTIFIED ON THE CERTIFICATE AS A CERTIFICATE HOLDER.
 (C)  "INSURANCE PRODUCER" HAS THE MEANING ASCRIBED TO IT BY SUBSECTION
 (K) OF SECTION TWO THOUSAND ONE HUNDRED ONE OF THIS CHAPTER.
 (D) "INSURER" MEANS ANY PERSON "DOING AN INSURANCE BUSINESS"  AS  SUCH
 PHRASE  IS DEFINED IN SECTION ONE THOUSAND ONE HUNDRED ONE OF THIS CHAP
 TER.
 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
 [ ] is old law to be omitted.
 LBD06628-02-3
        S. 3084                             2
 (E) "PERSON" MEANS ANY INDIVIDUAL, PARTNERSHIP,  CORPORATION,  ASSOCI
 ATION,  OR OTHER LEGAL ENTITY, INCLUDING ANY PUBLIC ENTITY AS DEFINED IN
 PARAGRAPH FIFTY-ONE OF SUBSECTION (A) OF SECTION ONE  HUNDRED  SEVEN  OF
 THIS  CHAPTER,  ANY  STATE  AUTHORITY  AS  DEFINED IN SUBDIVISION ONE OF
 SECTION  TWO  OF  THE  PUBLIC  AUTHORITIES  LAW,  ANY LOCAL AUTHORITY AS
 DEFINED IN SUBDIVISION TWO OF SECTION TWO OF THE PUBLIC AUTHORITIES LAW,
 AND ANY INTERSTATE OR INTERNATIONAL AUTHORITY AS DEFINED IN  SUBDIVISION
 THREE OF SECTION TWO OF THE PUBLIC AUTHORITIES LAW.
 (F)  "POLICYHOLDER"  MEANS A PERSON WHO HAS CONTRACTED WITH A PROPERTY
 OR CASUALTY INSURER FOR INSURANCE COVERAGE.
 

S 502. PROHIBITIONS. (A) NO PERSON SHALL PREPARE, ISSUE,  REQUEST,  OR
 REQUIRE THE ISSUANCE OF A CERTIFICATE UNLESS THE CERTIFICATE IS:

 (1)  A  STANDARD CERTIFICATE OF INSURANCE FORM PROMULGATED AND AUTHOR
 IZED FOR USE BY THE ASSOCIATION FOR COOPERATIVE OPERATIONS RESEARCH  AND
 DEVELOPMENT (ACORD) OR THE INSURANCE SERVICES OFFICE (ISO);
 (2)  A FORM PROMULGATED BY THE INSURANCE COMPANY THAT HAS UNDERWRITTEN
 THE POLICY REFERENCED IN THE CERTIFICATE OF INSURANCE; OR
 (3) A FORM PREPARED, ISSUED, OR REQUESTED AS EVIDENCE OF INSURANCE  IN
 CONNECTION WITH A COMMERCIAL LENDING TRANSACTION IN WHICH THE UNDERLYING
 PROPERTY SERVES AS THE PRIMARY COLLATERAL SECURING THE BORROWER'S REPAY
 MENT  OF  THE  LOAN, INCLUDING, BUT NOT LIMITED TO A FORM PROMULGATED BY
 THE MORTGAGE BANKERS ASSOCIATION (MBA).
 (B) NO PERSON SHALL ALTER, MODIFY, REQUEST OR REQUIRE  THE  ALTERATION
 OF A CERTIFICATE OF INSURANCE FORM.
 (C) NO PERSON SHALL REQUEST OR REQUIRE THAT A CERTIFICATE OF INSURANCE
 FORM  CONTAIN  ADDITIONAL TERMS, CONDITIONS, OR LANGUAGE OF ANY KIND NOT
 FOUND IN THE INSURANCE POLICY TO WHICH THE CERTIFICATE  MAKES  REFERENCE
 OR TO AN ENDORSEMENT TO SUCH POLICY.
 (D)  NO  PERSON  SHALL  REQUEST OR REQUIRE EITHER IN ADDITION TO OR IN
 LIEU OF A CERTIFICATE OF INSURANCE, AN OPINION LETTER, WARRANTY,  STATE
 MENT,  SUPPLEMENTAL  CERTIFICATE OR ANY OTHER DOCUMENT OR CORRESPONDENCE
 THAT IS INCONSISTENT WITH THE PROHIBITIONS OF THIS SECTION.  HOWEVER, AN
 INSURER OR INSURANCE PRODUCER MAY PREPARE OR  ISSUE  AN  ADDENDUM  TO  A
 CERTIFICATE THAT CLARIFIES AND EXPLAINS THE COVERAGE PROVIDED BY A POLI
 CY  OF  INSURANCE  AND  OTHERWISE COMPLIES WITH THE REQUIREMENTS OF THIS
 SECTION, PROVIDED SUCH AUTHORITY IS  GRANTED  TO  THE  PRODUCER  BY  THE
 INSURER.
 (E) NO PERSON SHALL REQUEST OR REQUIRE THAT A CERTIFICATE OF INSURANCE
 CONTAIN  REFERENCES  TO  A  CONTRACT OTHER THAN THE INSURANCE POLICY, OR
 WARRANT THAT THE INSURANCE POLICIES REFERENCED IN THE CERTIFICATE COMPLY
 WITH THE REQUIREMENTS  OF  A  PARTICULAR  CONTRACT  PROVIDED  HOWEVER  A
 CERTIFICATE  MAY  INCLUDE  A  CONTRACT TITLE OR DESCRIPTION FOR THE SOLE
 PURPOSE OF IDENTIFYING THE PROJECT FOR WHICH THE CERTIFICATE WAS ISSUED,
 BUT SUCH INCLUSION SHALL NOT  BE  INTERPRETED  AS  WARRANTING  THAT  THE
 INSURANCE  POLICIES  REFERENCED  IN  THE  CERTIFICATE  COMPLY  WITH  THE
 REQUIREMENTS OF SUCH CONTRACT.
 (F) NO PERSON SHALL REQUEST, REQUIRE, PREPARE OR ISSUE  A  CERTIFICATE
 OF  INSURANCE  THAT: (I) DOES NOT ACCURATELY STATE THE TERMS OF COVERAGE
 PROVIDED BY THE POLICY OR POLICIES OF INSURANCE TO WHICH THE CERTIFICATE
 MAKES REFERENCE; OR (II) PURPORTS TO ALTER, AMEND, EXTEND, OR  MISREPRE
 SENT THE TERMS OF COVERAGE TO WHICH THE CERTIFICATE MAKES REFERENCE.
 

S  503.  APPLICABILITY.  THE PROVISIONS OF THIS SECTION SHALL APPLY TO
 ALL CERTIFICATE HOLDERS, POLICYHOLDERS, INSURERS,  INSURANCE  PRODUCERS,
 OR  ANY  OTHER  PERSON  AND  TO CERTIFICATE OF INSURANCE FORMS ISSUED AS
 EVIDENCE OF  INSURANCE  COVERAGES  ON  PROPERTY,  OPERATIONS,  OR  RISKS
        S. 3084                             3
 LOCATED IN THIS STATE, REGARDLESS OF WHERE THE CERTIFICATE HOLDER, POLI
 CYHOLDER, INSURER, OR INSURANCE PRODUCER IS LOCATED.
 

S  504.  ENFORCEMENT.    THE SUPERINTENDENT SHALL HAVE THE POWER UNDER
 SECTION FOUR HUNDRED THREE OF THE FINANCIAL SERVICES LAW TO EXAMINE  AND
 INVESTIGATE THE ACTIVITIES OF ANY PERSON THAT THE SUPERINTENDENT REASON
 ABLY BELIEVES HAS BEEN OR IS ENGAGED IN 

AN ACT OR PRACTICE PROHIBITED BY
 THIS  ARTICLE.  THE  SUPERINTENDENT  SHALL HAVE THE POWER TO ENFORCE THE
 PROVISIONS OF THIS SECTION AND IMPOSE ANY AUTHORIZED PENALTY  OR  REMEDY
 AS  PROVIDED  UNDER SECTION FOUR HUNDRED EIGHT OF THE FINANCIAL SERVICES
 LAW AGAINST ANY PERSON WHO VIOLATES THIS ARTICLE.
 

S 505. RULES AND REGULATIONS. THE SUPERINTENDENT MAY  ADOPT  RULES  OR
 REGULATIONS  AS  HE  OR  SHE  CONSIDERS  APPROPRIATE  TO  CARRY  OUT THE
 PROVISIONS OF THIS ARTICLE.
 

S 2. This act shall take effect on the ninetieth day  after  it  shall
 have become a law.

S3084-2013: Relates to the issuance of certificates of insurance