Insurance Certificates – New Regulation Adopted

The Office of the Insurance Commissioner has recently announced the adoption of a new regulation governing the issuance of insurance certificates. (Click here for a complete copy of the regulation.)  That regulation will be effective on May 22, 2013.  It essentially follows the provisions of the statute on insurance certificates that was adopted by the Georgia legislature in 2011, fleshing out some of its requirements, and imposes some new requirements on insurers regarding the procedures to be followed by their agents when issuing such certificates.

The new regulation specifies that only insurers may file a request with the Insurance Commissioner’s Office to approve a form insurance certificate and it permits the use of expired ACORD and ISO forms, as long as ACORD and ISO permit their use “during periods of transition.”  Of most importance for insurance agents are the new requirements imposed on insurers, the type of references that may be made in an insurance certificate to other contracts, and how agents may respond to requests for confirmation that the insurance policy in question satisfies a contractual requirement. 

The new regulation requires insurers to provide “written instructions” to their agents “clearly outlining the insurer’s procedures and each party’s responsibilities for issuing and servicing certificates” and requires these procedures to address three subjects:  (i) the issuance of a notice of cancellation to certificate holders who have the right to receive such notice under a statute or the underlying insurance policy, (ii) the retention of copies of all certificates issued by agents, and (iii) the monitoring of certificates that have been issued to ensure compliance with the insurer’s procedures and any applicable law or regulation.

The new regulation states that an insurance certificate may contain a reference to or contract number for a “construction or service contract for identification purposes only” and provides that this may include a “project number, project name, project description, or a general description of work to be performed.”  However, “nothing in the certificate can refer to any language or contents in the construction or service contracts.”

The new regulation specifically states that an insurer or agent can not be required to issue an opinion letter or other document in addition to or in lieu of an insurance certificate.  This clarifies the statutory language on this subject by establishing a bright line rule that agents can now refer to in the event they are asked to do something beyond the mere issuance of an insurance certificate.  When that something consists of a request that an agent state whether an insurance policy satisfies a particular contract provision,  the regulation states that an insurer or agent “may provide the certificate holder with the certificate and an actual copy of the policy, insurance binder, or relevant policy provision to demonstrate contractual compliance.” 

Finally, the new regulation limits the use of insurance certificates that contain only a statement that the certificate does not amend or otherwise change the provisions of the underlying insurance policy and does not also contain a statement that it is being provided only for informational purposes.  Such certificates must specify the purposes for which they can be used and can only be used for those purposes.  Examples of such purposes found in the regulation are “mortgagee requirements or lending transactions.”  Any person requiring or using such certificates for an improper purpose can be fined up to $5,000 by the Insurance Commissioner and an offending agent’s license could be suspended or revoked.