How to Deal with Improper Requests Relating to Certificates of Insurance

January 2, 2019

Certificates of insurance is a topic that refuses to go away. It seems like every time I pick up a trade magazine or newsletter, I see an article or seminar dealing with this topic. In addition, we have received numerous inquiries from agents dealing with the issue of modification of certificates of insurance. These inquiries arise in any number of factual contexts. For example: an agent represents a subcontractor on a large construction project and receives a telephone call from the subcontractor indicating that the general contractor is withholding payments to the subcontractor, until the general contractor receives a certificate of insurance that is “satisfactory” to the general contractor. In many instances, this means that the certificate must name the general contractor as an “additional insured,” must indicate that the subcontractor’s policy is primary, and must provide for 30 days advance notice of cancellation. Of course, the agent’s customer wants this certificate to be issued immediately so payment can be made. Another example: an agent represents a general contractor who is the successful bidder on a public works project proposed by a municipality. The contract specifications, including the insurance requirements, have been prepared by the municipality’s engineering firm. These specifications provide that the engineer be named as an “additional insured,” the contractor’s policy be primary, and the contractor’s policy provide coverage to the engineer for its own negligence, exclusive of professional liability. The engineer will not accept a certificate unless it contains the requested specifications. If the certificate cannot be provided, the agent’s customer will lose out on the public works project. The agent is requested to issue a certificate containing the mandated provisions.

In both of these examples, the agent is put in an untenable position. The agent is being asked to make improper modifications to a certificate of insurance. It is common knowledge that a certificate of insurance is NOT an insuring document. Rather, it is simply evidence of insurance coverages that exist at a particular point in time. A certificate cannot be used to name additional insureds, nor can it be used to expand policy coverages. The Wisconsin Office of the Commissioner of Insurance (OCI) has issued a number of bulletins advising agents and carriers that they cannot make these types of prohibited alterations to certificates. Indeed, several years ago the Wisconsin legislature amended s. 628.34(1) of the Wisconsin statutes, which deals with the issue of misrepresentation, to state: “No intermediary may provide a misleading certificate of insurance.” Accordingly, agents who give in to the pressure to alter the certificates in the ways discussed above, run the risk of disciplinary action by OCI. However, the threat of disciplinary action against the agent certainly does not solve the problem that continues to exist in the marketplace. That problem is that customers are continuing to make these unreasonable demands, and putting the agent in the unwarranted position described above.

Recently, the Wisconsin legislature amended s. 628.34 of the statutes to include a subsection dealing with “Evidence of Insurance.”  That subsection provides in relevant part:

No person may prepare, request, or require a certificate of insurance or other document used for evidence of insurance to do any of the following:

  1. Contain information concerning the policy referenced … that is false, misleading, deceptive, unfairly discriminatory, or that otherwise violates public policy or law, as determined by the Commissioner.
  2. Purport to alter, amend, or extend coverage provided by the policy… .
  3. Alter the terms and conditions of any notice requirements in the policy. A person is entitled to notice of cancellation, nonrenewal, or any material change to the policy, or to any similar notice concerning the policy only as provided in the policy or an endorsement.

The statute goes on to provide that no certificate of insurance may warrant that the policy referenced in the certificate “fulfills the insurance or indemnification requirements of a specific contract.” As a side note, some agents have been requested to sign a document entitled “Agent’s Certification,” that contains a warranty by the agent that the requirements of the underlying contract with the general contractor or the subcontractor are satisfied by the subject policy. Agents should NEVER sign such a certificate.

In light of the statutory amendments, agents are now in a position to be proactive when confronted with unreasonable requests to alter certificates in order to conform with the way the certificate holder conducts business, or with the underlying contract requirements. When an agent receives such a request, we suggest that the agent contact the certificate holder and advise as to the provisions of the statute. In connection with this advice, it should be noted that the prohibitions contained in the statute are applicable not only to agents, but to persons who request or require a certificate that is contrary to the mandates of the statute. As such, the act of making an improper request is a violation of the statute. If someone persists in demanding such an altered certificate, we suggest the agent report the matter to OCI. Hopefully, word will get out that third parties, i.e. certificate holders, have to comply with the applicable statute, and can no longer use such tactics as withholding payments, or not awarding contracts, as a way to force agents to issue improper certificates. Agents can now effectively push back.