It is no secret that supplying a certificate of insurance to a bank, mortgage, finance company or insurance contract specialist can be a nightmare. From exact wording that is required to additional coverage that sometimes needs to be purchased to meet requirements, obtaining the COI can be an event in itself. Luckily for insureds the State of NJ has responded by passing The Certificates of Insurance Act that forbids certain requests from being made. Below is an outline of how this law protects insureds.
The focus of the new law is that a certificate cannot contain false or misleading information, specifically language that includes “warranties that are not expressly found in the underlying policy.” The law also provides the Department of Banking and Insurance to impose penalties for violators of the law, including fines up to $1,000 per violation.
Going forward, a certificate of insurance cannot warrant or guarantee that the insurance evidenced on a certificate fully complies with what a third party is asking. While an insured must have the insurance requirements they agreed to in an executed contract, it is no longer legal to require verbiage that guarantees the requirements have been met on a certificate of insurance. A practical example of this is that most finance companies require a contract number and description of financed property on a certificate of insurance. These specific inclusions, while still allowed on a certificate, cannot be interpreted as a warranty of coverage.
This law applies to all property, operations and risks in the state, regardless of where the policyholder, insurance producer, insurer or party requiring a certificate is located. In short, if someone has operations or property in the State of NJ, then this law applies to the insurance covering said property or operations. For the protection of the insured, any certificate issued that violates these new terms will be null and void.
It will be interesting to see how the application of this law plays out after it takes effect on April 10, 2016. The response from mortgage and finance companies will most likely be creative and hopefully not a new hurdle for Insureds to jump through. One truth is certain, and that is insurance certificates cannot make warranties regarding the compliance of insurance policies to contract requirements any longer.Filed Under: Blog, Business Insurance, Commercial Insurance | Tagged With: Business insurance, Certificates of Insurance, Chris Christie, COI, Insurance Law, New Jersey, New Law, Property