The Trouble with Certificates

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Authored by attorney Douglas M. Palais

Even though issuing certificates is an important part of the service that you provide to your customers, from an E & O standpoint, they must be handled with extreme care.  The following points are not comprehensive, but demonstrate a few of the specific risks and offer some tips to avoid these pitfalls.

  • First and foremost, never generate information on a certificate demanded by a customer or a third-party unless and until you are satisfied that the information is completely accurate.
  • What are the best ways to accomplish this result?
  • Have a written agency policy that mandates the internal procedures that must be followed before a certificate is issued|
  • Make sure that all agency personnel read the policy and are periodically reminded of it
  • Never manually generate certificates.  Instead, be sure that they are generated from your agency management system AFTER the customer information has been checked
  • In the event of a cancellation, re-issue any related certificates to reflect that the policy is no longer in force
  • Can you rely on the disclaimer language that appears on the Acord form?  From an E & O standpoint, you cannot.While the form makes it clear that the insurance policy provisions govern, far too many E & O claims arise from the issuance of an inaccurate certificate.In these instances, the agency must defend itself despite the disclaimer language.
  • Workers compensation coverage on certificates is a hot area for E & O claims, particularly with respect to construction customers and third-parties.

Doug Palais has been the “lawyer of choice” for IIAV’s Professional Liability clients for over 25 years.  Doug recently joined the Vandeventer Black LLP law firm, which is a full service, international business law firm operating for over 100 years.  He is a seasoned trial lawyer and counselor with 35 years of experience and concentrates his practice in Professional Liability; Errors & Omissions Defense of Insurance and Securities Professionals; Directors & Officers Liability Defense; Securities Litigation and Arbitration; Insurance Coverage and Defense; Legal Malpractice Defense and Financial Institutions and Securities.  Doug regularly writes and speaks on issues relating to insurance agents and brokers.  He is also a frequent speaker for IIAV on professional liability and regulatory matters.  Doug also makes himself available to member agents in connection with legal problems.

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