OGC Opinion No. 10-11-16

The Office of General Counsel issued the following opinion on November 22, 2010 representing the position of the New York State Insurance Department.

Re: Amendment to ACORD form

Questions Presented:

1. May an insurance agent add terms to a standard ACORD certificate of liability insurance that modify the terms of the actual policy without violating the Insurance Law?

2. Must an insurer provide the New York City Department of Consumer Affairs, which is an additional insured under the subject policy, with notice of each policy cancellation or non-renewal?

Conclusions:

1. No, an agent may not add terms or clauses to a certificate of liability insurance that alter, expand, or otherwise modify the terms of the actual policy unless authorized by the insurer that has filed an appropriate endorsement with the Superintendent of Insurance and obtained prior approval, if required, pursuant to N.Y. Ins. Law § 2307(b) (McKinney 2000 & Supp. 2006).

2. No, an insurer is not required under Insurance Law §3426(c) (which applies to commercial property/casualty insurance policies) to provide notice to an additional insured, although it may provide notice if it chooses to.

Facts:

The inquirer reports that the ACORD 25 (2009/09) certificate of liability insurance does not provide space for an agent to enter the number of day’s notice of cancellation that the insurer will give to the certificate holder. It states, “Should any of the above described policies be cancelled before the expiration date thereof, notice will be delivered in accordance with the policy provisions.” The inquirer further reports that the New York City Department of Consumer Affairs will not accept the ACORD 25 (2009/09) certificate of liability insurance and refuses to renew, or grant, licenses to restaurant owners who use the above mentioned certificate.

As noted in Circular Letter 15 (1997) and Circular Letter 8 (1995), an agent may not “add terms or clauses to a certificate of insurance [COI], which alter, expand, or otherwise modify the terms of the actual policy….” The inquirer asks whether an agent may type in the old wording from the previous edition of the COI without violating the Insurance Law. In regards to the relevant section, the wording of the previous ACORD 25 (2009/01) states:

The inquirer also reports that the New York City Department of Consumer Affairs, a liability additional insured, may be operating under the assumption that the insurers are providing it with notice of each cancellation or non-renewal. Insurance Law § 3426 establishes the rules and procedures governing mid-term cancellations of commercial policies. The statute does not provide for notice to a liability additional insured. It only provides for notice to the first name insured and mortgagees.

Analysis:

An understanding of the purpose of an ACORD certificate of insurance is relevant to this inquiry. An ACORD certificate of insurance is a commercially-created document that is often used by the insurance industry to summarize information about a person or entity’s insurance coverage. It is not a contract; not required by statute or regulation; and not required to be filed with the Department. Thus, there is no specific language that is required to be used on an ACORD certificate of insurance, provided that it contains information consistent with the terms of the insurance policies evidenced thereon. See Opinion of Office of General Counsel (“OGC”) No. 02-12-04 (December 4, 2002).

1. Amending an ACORD Certificate

Circular Letter No. 8 (1995) and Circular Letter No. 15 (1997) provide, in pertinent part, as follows:

A licensed producer may not: add terms or clauses to a certificate of insurance that alter, expand, or otherwise modify the terms of the actual policy unless authorized by the insurer that has filed an appropriate endorsement with the Superintendent and obtained prior approval, if required. See Circular Letter No. 15 (1997).

The above-referenced Circular Letters apply to the alteration of an ACORD certificate that is inconsistent with the terms of the referenced insurance policy. The actual form of the certificate is not governed by the Insurance Law and may be reworded so long as the reworded certificate does not impose any new obligation on the insurer and is not otherwise inconsistent with the policy provisions.

2. Expanding Notice of Cancellation

With respect to modifying the language in an ACORD certificate to expand notice of cancellation requirements, if the notice requirement is not contained in the policy, the modified ACORD form imposes an obligation or liability not presently existing upon an insurer. Consequently, there is an altering, expanding, or modification of rights between an insured or additional insured and the insurer. With such a change in terms, a certificate of insurance would constitute a policy form that must be filed with the Superintendent of Insurance. See OGC Opinion No. 06-02-11 (February 15, 2006). This includes modifying the language in an ACORD form to expand the responsibility of the insurer to require notification of additional parties.

Contracting parties may agree to “amend” the ACORD forms but absent participation in the process or subsequent ratification, the insurer may not be bound by the amendment. See OGC Opinion No. 00-09-04 (September 8, 2000). While an insurer may assume obligations beyond those required by the applicable statute, the insurer would need to make an appropriate filing pursuant to Insurance Law §2307(b) (McKinney 2006).

For further information you may contact Supervising Attorney Samuel A. Wachtel at the New York City Office.