After I announced the successful passage of the MIIAB sponsored certificate insurance law this session, I have received numerous questions about the application of the new. Since the law will take effect August 1, the association is trying to get out as much information as we can to help our members understand its impact. Please find below an excellent article that appeared in our recent newsletter written by MIIAB Technical Advisor, Bernie Neff.
This law attempts to address the growing and cumbersome problem of third party requests for non-standard or amended insurance certificates. It does not address every situation that you may face. Also keep in mind, most third parties requesting certificates are not even aware of the new law. It will take some time for the new law to filter to all interested parties and the law only regulates the action of insurers and insurance agents not those making requests for certificates.
The MIIAB will be meeting with the Department of Commerce later this month to discuss their enforcement of the new certificate statute. We will have more to report shortly.
The August 1, 2009 Certificate Bill
As most of you know, Minnesota has joined several other states in enacting a special bill on certificates of insurance. This was a bill that was sponsored by our association and our intent was to make things a bit easier for our agents relative to this thorny problem of handling certificates, especially with the ever increasing third party requests to show "coverages" that were way beyond the scope of insurance or impossible to get from our carriers. Here are the highlights of this bill.
The new law makes it clear that a certificate of insurance is merely a "snapshot" of the policy - it simply provides evidence of what the policy will contain. In keeping with this thought, the new law requires a statement on each certificate issued to any person other than the policyholder that says: "This certificate or memorandum of insurance does not affirmatively or negatively amend, extend or alter the coverage afforded by the insurance policy." Agents are also not allowed to issue an opinion letter or other correspondence that alters coverage or provides different notice than what is provided in the statute. In a word, a certificate can show what is on the policy; but cannot change anything on the policy.
The statute also provides a cancellation notice: "A certificate provided to a third party must not provide for notice of cancellation that exceeds the statutory notice of cancellation provided to the policyholder." This is obviously aimed at those requests to give third parties to the insurance contract more notice than the named insured gets. Now you can say "no" to them - it is against our Minnesota statute.
The new statute also addresses the issue of various certificate forms, floating around the marketplace. Many were "invented" by people who were obviously not insurance people. From now on, insurance carriers that use certificate forms that are not ACCORD or ISO forms have to file them with the Commissioner prior to using them. Thus, those interesting forms that come from certain third parties may no longer be used. Also, this section prohibits (again) the amendment of filed (and approved) forms at the request of a third party.
Another word on opinion letters and other correspondence issued by licensed insurance producers - the statute prohibits them if they are inconsistent with this statute.
If you are wondering about the penalties for not complying with the new law, just look up Section 60K.46 which applies to prohibited acts for licensed insurance producers. Suspension of your license, termination of your license and other civil penalties (like fines) are shown. The penalties can be severe and should be avoided at all times.
Now, when you get some kind of crazy third party request, like "please show that the whole world is an additional insured on the certificate", you can say "No!" "Can't do it, it is illegal", and you can specifically reference them to Section 60A.39 of the Minnesota state insurance code.
The MIIAB worked long and hard to get this bill passed, and it is a good start. We will have to wait and see what comes down the road to cause further problems. I would like to mention four people who deserve a lot of credit (with apologies to anyone else who should be mentioned) for trying make things a little easier for our agents and brokers: Dan Riley, Dominic Sposeto, Dave Szczepanski and Dick McKenney. And of course, our legislative committee. Thanks for all the hard work!