QAs a service to our customers, we always read the insurance requirements in any contract before issuing a Certificate of Insurance. We want to assure our customer that the insurance provided meets the requirements. How should we handle situations when an additional insured is requesting a 30-day notice of policy cancellation? If we point out that the coverage is not in compliance, the insured may lose out on the contract. Since the carrier’ s will not do this, could our agency send the additional insured notice of cancellation? The problem we see is that we do not always know that a policy is going to be cancelled 30 days out. Any suggestions? Teresa, Florida a
Teresa, your question raises so many concerns, but I will try to address each of them in this short, condensed response. First of all, the fact that you are reading the insurance requirements of contracts is a good practice, but only if this is done by someone highly skilled and experienced in this area. This person needs to have an in-depth understanding of the coverage form, including an understanding of how the policy will respond to complex contractual situations.
You state that the certificate holders are additional insureds. There are two ways they can become an additional insured:
1. By being named in the policy by endorsement. Most carriers are not willing to name an additional insured without charging a premium for the endorsement. It will depend on the language in the endorsement whether the additional insured will receive a notice of cancellation. Some carriers may even be willing to send a 30-day notice, perhaps excepting non-payment of premium.
ANSWERS TO YOUR E & O QUESTIONS
Certificate of Insurance BY MARY LAPORTE, CPCU, CIC, LIC, CPIA
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2. By blanket additional insured endorsement. The ISO form CG 20 33 Additional Insured – Owners, Lessees or Contractors – Automatic Status When Required in Construction Agreement With You endorsement requires that the additional insured status applies only“ when you and such person or organization have agreed in writing in a contract or agreement that such person or organization be added as an additional insured on your policy”. Other carrier endorsements may be more restrictive. Since the carrier does not know the identity of every party covered under the endorsement, they certainly are not sending notice of cancellation to anyone.
If your agency were to take on the role of notifying additional insureds of cancellations, it would greatly increase your E & O exposure. You would need a fool-proof system to assure that none were missed. As you already stated, in many situations, you often don’ t even know about a cancellation in sufficient time to do so. An additional insured would consider the fact that you didn’ t know about a cancellation to be a poor excuse for noncompliance with the requirement.
The better alternative is to have a frank conversation with your insured as you explain the problem. If your carrier is willing to endorse the additional insured to the policy, you must explain that the endorsement will result in an additional premium. Depending on the carrier, this may or may not result in the additional insured receiving a 30-day notification. If this is not an option, advise your customer that the notice cannot be provided. A good risk management practice is to put this statement in writing to your insured.
Mary LaPorte is a consultant and educator with a strong background in Errors & Omissions loss prevention. Forward your E & O questions to her at marylp @ lpinsuranceconsult. com.
14 KANSAS INSURANCE AGENT & BROKER | March- April 2017 |