Effective January 1, 2012- Important Certificate of Insurance Changes

Our agency routinely issues certificates of liability on our clients' behalf.  We would like to share with you some important information regarding new changes to the laws surrounding certificates of insurance.

The Texas Legislature passed and Governor Perry signed Senate Bill 425 to become effective January 1, 2012.  This law will require all certificate of insurance forms to be filed with and approved by the Texas Department of Insurance before they can be used (after 1/1/12).  In addition, the law codifies current TDI rules that a certificate of insurance must not obscure or misrepresent the coverage provided by the insurance policies.

Insurance agents could incur significant penalties under the new law, including the revocation of the agency's insurance license, if a certificate were issued incorrectly.  Unfortunately this means that in most instances we will not be able to issue a certificate exactly as the certificate holder requests.  After January 1, a certifcate holder who requires an agent or policyholder to use an unapproved form or insert inappropriate language on a certificate may be sued by the Attorney General for injunctive relief.  Further, they may recover a civil penalty of up to $1,000 for each such requirement.

Because of these changes, we will not be able to comply with some of the items routinely requested by certificate holders.  When we encounter a certificate request that we cannot comply with, we will explain each of these items in a separate attachment to the certificate, and we will send you a copy of the explanation.  As an alternative, we will offer to send a complete copy of your policy to the certificate holder, subject to your approval.  Here are a few items we expect to encounter, when managing this situation:

• 30 Day Notice of Cancellation- Previous certificates contained a promise to "endeavor to" mail within 30 days written notice of cancellation to a certificate holder.  Due to the misleading nature of this statement, TDI has ruled that the standard ACORD form certificate will no longer contain this wording.  Therefore, should a certificate holder require a 30 day notice of cancellation on your coverage, we will have to endorse the policy accordingly.  Please note, this endorsement may not be available on all policies, and may come with an additional premium on other policies.
• Additional Insured in favor of certificate holder- Many policies contain blanket additional insured endorsements, which give additional insured status to holders, if required by a written contract, signed by an authorized representative of the named insured, prior to a loss.  However, some certificate holders will require a specific endrosement, naming them as additional insureds on the policy.  Note, this endorsement may come with additional premium on some policies.

The specific issues above are certainly not all inclusive.  We will explain each provision as the individual situation necessitates.  It is important to understand that issuance of a certificate of insurance does not imply all contractual requirements are met.  It is important that you review contracts carefully, and that with the help of your attorney, you review contracts to ensure you are not "overpromising" the level at which your insurance affords protection.  Cravens Warren stands ready to help you through this evolving circumstance, and we encourage you to call with any questions you have.