The Office of General Counsel issued the following informal opinion on January 22, 2001, representing the position of the New York State Insurance Department.
Insurance Department Circular Letters No. 8 (1995) and No. 15 (1997) N..Y. Ins. Law § 2307(b) (McKinney 2000)
QUESTION PRESENTED
May a licensed producer permitted to incorporate a "hold harmless" clause on a certificate of insurance that it issues to a municipality, which clause alters the language or terms of the actual insurance policy?
CONCLUSION
No. Circular letters No. 8 (1995) and No. 15 (1997) are very clear in stating that "any document that amends, expands or otherwise alters the terms of the applicable insurance policy constitutes a policy form which must be filed with the Superintendent of Insurance in accordance with Section 2307(b) of the Insurance Law."
FACTS
A producers client is a contractor for a town that requires insurance agents to sign and acknowledge receipt of a hold harmless clause, which is made part of the certificate of insurance the producer issues. Notwithstanding the warning to government entities contained in Circular Letter No.15 (1997) that "a certificate of insurance, even one completed by a licensed producer, is not the best evidence of the terms of an insurance policy and may not accurately reflect the actual terms of the policy", the town continues to require that the clause be signed by the contractor doing the work before a notary public and that the receipt of the incorporated hold harmless clause be acknowledged on the ACORD certificate of insurance.
ANALYSIS
The ACORD certificate of insurance is a corporate-produced document used in business and not required by statute. The purpose of the document is to summarize the essential terms of particular insurance coverage, after identifying the insurance producer, the insured, the insurer, any additional insured, and the certificate holder. It is used to facilitate business operations in a timely and convenient manner by assuring a customer that there is liability insurance covering the party about to engage in a contracted project. The certificate is not intended to confer on a certificate holder new or additional rights beyond what the policy provides. It is merely evidence of a contract of insurance. The insurance policy, not the certificate, is the contract which binds the parties within the insurance transaction and any changes to coverage must be made by amending the policy, not by making a change on the certificate. The certificate reflects and reveals the most important rights and obligations in the insurance policy but it changes nothing in the policy and neither adds to nor subtracts from anything therein.
Accordingly, if the town insists on the inclusion of the policy-altering hold harmless clause in the certificate, "[l]icensed producers are advised that they may not add terms or clauses to a certificate of insurance which alter, expand or otherwise modify the terms of the actual policy unless authorized by the insurer which has filed an appropriate endorsement with the Superintendent of Insurance and obtained prior approval, if required. The Department may seek disciplinary measures against producers who continue this practice without authorization from the insurer." (Circular Letter No.15, 1997).
For further information you may contact Associate Jeffrey A. Stonehill, at the New York City Office.