A bill has been introduced in the New York Senate that would provide protection to insurance agents from abusive practices involving certificates of insurance.

James Seward

New York State Sen. James L. Seward (R-Milford) introduced No. 4425, which is expected to be introduced in the Assembly by Assemblyman Joseph D. Morelle (D-Irondequoit) later this week. Both men chair their legislative body’s insurance committees.

The Independent Insurance Agents & Brokers of New York is supporting the bill, saying it will prevent an awkard position for agents, according to David M. Gelia, IIABNY chair of the board.

“Businesses and government agencies with whom clients do business are increasingly making demands for certificates of insurance that producers cannot legally meet,” Gelia said in a statement. “When this bill becomes law, they will no longer be able to place producers in an impossible position.”

In recent years, insurance producers in New York and throughout the U.S. have reported that many organizations are increasingly demanding that producers make statements on certificates that expand coverage beyond what the policies provide. Organizations frequently insist that certificates promise that the insurance companies will provide them with lengthy advance notice if the company or the insured business cancels the policies or makes material changes. Other common demands are for guarantees of complete coverage for any indemnity agreements between the organization and the insured business, and warrantees from producers that the policies comply with all of the requirements of often-complex contracts, according to the IIABNY.

Insurance producers who comply with these demands risk violating insurance law and incurring fines for issuing fraudulent certificates. Those who refuse risk losing customers.

The bill, which the IIABNY and the Professional Insurance Agents of New York worked on, would:

• Prohibit the use of any certificate of insurance forms that regulators have not approved. The bill automatically approves forms created by the Association for Cooperative Operations Research and Development (ACORD).
• Prohibit individuals, businesses and government entities from demanding certificates that contain false or misleading information about the policies listed on them.
• Clarify that certificate holders have a legal right to advance notice that an insurance company will cancel the policies listed on the certificate only if the policies provide for that notice.
• Give regulators the authority to assess fines of up to $1,000 for each violation.

“Within limits, businesses and government entities have a perfect right to ask the contractors and vendors they work with to provide sufficient evidence of insurance coverage,” Gelia said. “This legislation is necessary because some entities have abused that right.”