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

Historically, agencies have relied on the use of disclaimer language in certificates for protection, but recent court decisions have shown this is not always enough. In one case from 2019, after telecommunications company T-Mobile was issued a certificate that incorrectly named them an additional insured, the Washington Supreme Court declared:

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, we recommend agencies adopt additional measures to ensure they are adequately protected against E&O arising out of 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, include confirmations with respect to what additional insured endorsements are acceptable, when they can be attached to certificates, and what other forms can be attached. In addition, address your authority to issue certificates for policies placed through wholesale brokers or other non-direct relationships. Also, include who is responsible for notifying holders with 30-day cancellation notices.
  • Have a discussion. Communicate with your insured about the types of coverage they have available and the terms and conditions under which additional insured, waiver of subrogation, notice of cancellation, and other extensions are available. Encourage them to review contractual requirements with you before the contract is signed.
  • Set expectations. Your insured must understand the limits of your responsibility for reviewing their contracts and agreements. Make it clear that you will only be looking at the insurance requirements and that any other provision should be reviewed by an attorney. 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. By utilizing 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.