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.
TITLE OF BILL: An act to amend the insurance law, in relation to certificates of insurance
To establish standards for the proper issuance of certificates of insurance and to authorize the department of financial services and other entities 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 insurance 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, knowingly 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 accompanying 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 superintendent, the NYS inspector general, and other appropriate entities.
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.
Under current law, an insurance producer may not add terms or clauses 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 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.
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 transactions 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, including 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 policy. In other cases, government agencies or private contractors may demand that terms be added to the standard ACORD certificate of insurance 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 clauses to a certificate of insurance which alter, expand or otherwise modify the tears of the actual policy unless authorized by the insurer which has filed an appropriate endorsement with the Superintendent of Financial 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 authorities and corporations, 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 producer 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.
S.5804 of 2012-13 veto message number 257 of 2013 S.4425-B of 2011-12
90 days after it shall have become a law.
STATE OF NEW YORK ________________________________________________________________________ 6545 IN SENATE February 4, 2014 ___________Introduced by Sen. SEWARD -- 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. A CERTIFICATE OF INSURANCE SHALL NOT CONFER TO ANY PERSON NEW OR ADDITIONAL RIGHTS BEYOND WHAT THE REFERENCED POLICY OF INSURANCE EXPRESSLY PROVIDES. (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. LBD13740-02-4 S. 6545 2
(E) "PERSON" MEANS ANY INDIVIDUAL, PARTNERSHIP, CORPORATION, ASSOCI- ATION, OR OTHER LEGAL ENTITY, BUT SHALL NOT INCLUDE ANY GOVERNMENTAL ENTITY, AS THAT TERM IS DEFINED IN THIS SECTION. (F) "GOVERNMENTAL ENTITY" MEANS ANY PUBLIC ENTITY AS DEFINED IN PARA- GRAPH 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. (G) "POLICYHOLDER" MEANS A PERSON WHO HAS CONTRACTED WITH A PROPERTY OR CASUALTY INSURER FOR INSURANCE COVERAGE. S 502. PROHIBITIONS. (A) NO PERSON OR GOVERNMENTAL ENTITY SHALL PREPARE, ISSUE, REQUEST, OR REQUIRE THE ISSUANCE OF A CERTIFICATE IF SUCH PERSON OR GOVERNMENTAL ENTITY KNOWS THAT SUCH CERTIFICATE DOES NOT COMPLY WITH THE FOLLOWING PROVISIONS: (1) THE CERTIFICATE IS A STANDARD CERTIFICATE OF INSURANCE FORM PROMULGATED AND AUTHORIZED FOR USE BY THE ASSOCIATION FOR COOPERATIVE OPERATIONS RESEARCH AND DEVELOPMENT (ACORD) OR THE INSURANCE SERVICES OFFICE (ISO); (2) THE CERTIFICATE IS A FORM PROMULGATED BY THE INSURANCE COMPANY THAT HAS UNDERWRITTEN THE POLICY REFERENCED IN THE CERTIFICATE OF INSUR- ANCE; OR (3) THE CERTIFICATE IS A FORM PREPARED, ISSUED, OR REQUESTED AS EVIDENCE OF INSURANCE IN CONNECTION WITH A COMMERCIAL LENDING TRANS- ACTION IN WHICH THE UNDERLYING PROPERTY SERVES AS THE PRIMARY COLLATERAL SECURING THE BORROWER'S REPAYMENT OF THE LOAN, INCLUDING, BUT NOT LIMIT- ED TO A FORM PROMULGATED BY THE MORTGAGE BANKERS ASSOCIATION (MBA). (B) NO PERSON OR GOVERNMENTAL ENTITY SHALL ALTER, MODIFY, REQUEST, OR REQUIRE THE ALTERATION OF A CERTIFICATE OF INSURANCE FORM WHEN SUCH PERSON OR GOVERNMENTAL ENTITY KNOWS THAT SUCH ALTERATION, MODIFICATION, REQUEST OR REQUIREMENT IS IN VIOLATION OF THIS ARTICLE. (C) NO PERSON OR GOVERNMENTAL ENTITY 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 WHEN SUCH PERSON OR GOVERNMENTAL ENTITY KNOWS SUCH REQUEST OR REQUIREMENT IS IN VIOLATION OF THIS ARTICLE. (D) NO PERSON OR GOVERNMENTAL ENTITY SHALL REQUEST OR REQUIRE EITHER IN ADDITION TO OR IN LIEU OF A CERTIFICATE OF INSURANCE, AN OPINION LETTER, WARRANTY, STATEMENT, SUPPLEMENTAL CERTIFICATE OR ANY OTHER DOCU- MENT OR CORRESPONDENCE THAT SUCH PERSON OR GOVERNMENTAL ENTITY KNOWS TO BE 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 OR GOVERNMENTAL ENTITY SHALL REQUEST OR REQUIRE A CERTIFICATE OF INSURANCE THAT SUCH PERSON OR GOVERNMENTAL ENTITY KNOWS CONTAINS REFERENCES TO A CONTRACT OTHER THAN THE INSURANCE POLICY, OR WARRANTS 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 THES. 6545 3
INSURANCE POLICIES REFERENCED IN THE CERTIFICATE COMPLY WITH THE REQUIREMENTS OF SUCH CONTRACT. (F) NO PERSON OR GOVERNMENTAL ENTITY SHALL REQUEST OR REQUIRE, PREPARE OR ISSUE A CERTIFICATE OF INSURANCE THAT SUCH PERSON OR GOVERNMENTAL ENTITY KNOWS: (I) DOES NOT ACCURATELY STATE THE TERMS OF COVERAGE PROVIDED BY THE POLICY OR POLICIES OF INSURANCE TO WHICH THE CERTIFICATE MAKES REFERENCE; (II) PURPORTS TO ALTER, AMEND, EXTEND, OR MISREPRESENT THE TERMS OF COVERAGE TO WHICH THE CERTIFICATE MAKES REFERENCE; OR (III) PURPORTS TO CONFER TO ANY PERSON NEW OR ADDITIONAL RIGHTS BEYOND WHAT THE REFERENCED POLICY OF INSURANCE EXPRESSLY PROVIDES. 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 LOCATED IN THIS STATE, REGARDLESS OF WHERE THE CERTIFICATE HOLDER, POLI- CYHOLDER, INSURER, OR INSURANCE PRODUCER IS LOCATED. S 504. ENFORCEMENT. (A) THE SUPERINTENDENT SHALL HAVE THE POWER UNDER SECTION FOUR HUNDRED FOUR 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. (B) THE OFFICE OF THE STATE INSPECTOR GENERAL SHALL HAVE THE POWER PURSUANT TO SECTION FIFTY-THREE OF THE EXECUTIVE LAW TO INVESTIGATE ANY GOVERNMENTAL ENTITY THAT IS CONSIDERED A COVERED AGENCY UNDER SECTION FIFTY-ONE OF THE EXECUTIVE LAW THAT HAS BEEN OR IS ENGAGED IN AN ACT OR PRACTICE PROHIBITED BY THIS ARTICLE. IF A GOVERNMENTAL ENTITY NOT CONSIDERED A COVERED AGENCY UNDER SECTION FIFTY-ONE OF THE EXECUTIVE LAW HAS BEEN OR IS ENGAGED IN AN ACT OR PRACTICE PROHIBITED BY THIS ARTICLE, THAT ENTITY'S INSPECTOR GENERAL, OTHER COMPLIANCE OR INTERNAL INVESTI- GATIVE UNIT OR OTHER OFFICIAL OR ENTITY WITH PROPER AUTHORITY SHALL HAVE THE POWER TO INVESTIGATE SUCH ENTITY. 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.