ACORD Introduces New Insurance Certificate Forms

Tips for Dealing with the New ACORD Insurance Certificate Forms

December 2009 -- In late 2009 and early 2010, ACORD (the Association for Cooperative Operations Research and Development) introduced new certificate of insurance forms with an effective date of December 2009. The new forms do not contain the pledge of previous forms that the insurer will "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."

Below is a summary of how standard policy notice provisions operate. State laws regarding cancellation sometimes require that the length of the notice be altered somewhat, but they do not generally affect who must be given notice.

• Only the "first Named Insured" of most types of liability policies will be notified of cancellation or intent not to renew.

• Additional Insured under liability policies will receive no notice whatsoever.

• Mortgage holders and loss payees on 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 non-renews the policy.

• No one will be notified if the first Named Insured (rather than the insurer) cancels or non-renews an ISO policy.

This, of course, presents problems for the contracting parties, both for those who want to make sure that insurance is in place and for those who need to show they are complying with the insurance provisions of the contract. It also places agents and brokers in the very difficult position of being expected to provide a service that they are not able to perform.

Unfortunately, there are no perfect solutions to these problems, but here are a few thoughts for mitigating them to some extent:

• Certificate holders might request that the insured vendor, lessor, or contractor ask its insurer to issue an endorsement providing notice of cancellation to the certificate holder. It is unlikely that all insurers will be willing to comply, however.

• Certificate holders could modify their contract with the insured to require that the insured give them immediate notice if the policy is canceled or non-renewed. This has the obvious drawback of depending on the very party who is nonperforming to report the situation.

• For a variety of legal, risk management, and business reasons, agents and brokers should not generally sign manuscript or ACORD certificates that have been modified to include a required notice of cancellation to the certificate holder.

In this age of ever improving technology, it is a shame that the insurance industry cannot or will not develop a workable solution that meets the legitimate business needs of insured, certificate holders, and agents/brokers.

Reprinted with permission from www.IRMI.com. Copyright 2000 - 2010, IRMI, Dallas, TX.