Avoiding Certificate of Insurance E&O: Part 1

Brenda is a Senior Solutions Specialist at ReSource Pro with over 35 years of experience in the insurance industry.

Is disclaimer language enough to protect an agency against E&O?

Certificates of insurance are vital and often urgent documents for insurance customers who require proof of insurance. But for insurance agencies, they can be a stressful interruption and a potential source of errors and omissions (E&O) risk.

Agencies in the past used disclaimer language in certificates to protect themselves. Recent court decisions have shown this is not always enough.

An insurance company’s agent who makes an authoritative representation binds the insurance company, even when that specific representation is transmitted via a certificate of insurance and accompanied by general disclaimers.

Because of this, agencies should take extra steps to protect themselves from E&O resulting from certificates of insurance. In this post, we’ll cover several E&O prevention best practices agencies can incorporate.

E&O prevention prior to binding

In our experience working with insurance organizations, E&O prevention should begin prior to binding coverage. Below are some best practices we recommend agencies adopt.

  • Review and compare. Carefully review all applications and updates at renewal and compare them to quotes before binding. Ensure any changes in forms do not leave gaps based on the insured’s current operations.
  • Include confirmations. In your bind orders, confirm what additional insured endorsements are acceptable, and when these or other forms can be attached to certificates. Additionally, address your authority to issue certificates for policies placed through wholesale brokers or other non-direct relationships. You should also specify who is responsible for sending 30-day cancellation notices to holders. 
  • Have a discussion. Discuss with your insured the various types of coverage available to them. Explain the terms and conditions for obtaining additional extensions, such as waiver of subrogation and notice of cancellation. Encourage insureds to review contractual requirements with you before signing the contract. 
  • Set expectations. Your insured must understand the limits of your responsibility for reviewing their contracts and agreements. Make clear that you will only examine insurance needs and advise consulting an attorney for other provisions. Also, set expectations around how you will handle certificate requests that are not in compliance with their insurance program.

Minimize the risk around certificates of insurance

Disclaimer language alone is not enough to protect agencies against E&O. With the best practices outlined in this post, agencies can further reduce the likelihood of a claim being brought against them by an insurer or insured. In the second part of “Avoiding Certificate of Insurance E&O,” we’ll share E&O prevention tips to adopt when issuing certificates themselves.

Are certificates of insurance a frequent distraction that prevents your agency from focusing on growth? Learn how our Certs Center can help.