The Certificate and Evidence of Insurance forms which ACORD made effective in late 2009/early 2010 have raised alarm among insurance certificate holders and the insureds that must provide them. Unless insurers issue manuscript endorsements to their policies (which is unlikely), insurers no longer make any pledge that they will even attempt to notify most certificate holders if the policies are cancelled. The new certificate forms have eliminated the assurance that the insurer would “endeavor to mail __ days written notice to the certificate holder.” They simply state that “…should any of the above described policies be cancelled before the expiration date thereof, notice will be delivered in accordance with the policy provisions.”
What does that mean to certificate holders under standard insurance policies?
- Liability and auto – Even if a certificate holder is an additional insured, it will not be notified if the policy is cancelled. Only the First Named Insured will be notified.
- Workers compensation – Certificate holders will not be notified of cancellation, since the policy requires the insurance company to notify only the covered employer.
- Property – Mortgagees and loss payees on standard property policies will be notified – 10 days before the insurer cancels for nonpayment, 30 days before it cancels for any other reason and 10 days before it nonrenews the policy (unless modified by state requirements). Other certificate holders, even additional insureds, will not be notified.
- All policies – Certificate holders, even additional insureds, will not be notified if the insured itself cancels the policy.
How should insurance requirements in contracts be changed in order to respond?
- Contract language requiring insurance certificates to state that “__ days notice of cancellation be given” and requiring that the “endeavor to” language in the certificate be deleted, is no longer applicable. Even if changes are made to the certificate, ACORD has made it exceedingly clear that changes to the certificate do not change the policy.
- The contract should require that the insured party provide immediate notice to the owner, lessor, etc. if the insured entity receives notice of cancellation or nonrenewal from its insurer. This provision is especially important since many insurers will not be willing to comply with the recommendations below, especially for smaller insureds. Unfortunately, this has the obvious drawback of depending on the very party who is non-performing to report the non-performance.
- Contracts should require that the insured’s policies be endorsed to meet the certificate holder’s reasonable requirements. (However, as stated above, not all insurers will be willing to cooperate.) If the insurer is somewhat cooperative, it may be willing to extending the same insurancegui rights to the certificate holder that it gives to the first Named Insured. Below is sample manuscript endorsement wording that would accomplish that end. Very large insureds may be able to obtain even broader notification rights.
“If we cancel or elect not to renew this policy, we will give written notice to ____________ at the following address __________________. We will provide the same notice of cancellation and nonrenewal that is required by this policy to the first Named Insured.”