What Does an Agent Owe a Certificate Holder?

Six “truths" surround the issuance of certificates of insurance (COI):

Be truthful.
The less detail, the better; but, don't be too vague.
Never commit to anything that can't absolutely be proven with policy language.
Never generalize coverage.
Attach a copy of the additional insured (AI) endorsement.
Attach a listing of all commercial general liability forms and endorsements and let the holder and/or AI ask for what they want to review.

As flippant as these truths may sound, they really aren't. Basically, no agent can generalize a 100-page policy in a few lines, something will be missed. Further, agents can't attest to anything he/she doesn't know for sure (which is why phrases such as, “As per contract" should never be used).

Certificate holders are adults with the opportunity and ability to ask any questions and seek clarification on any point they desire. If they don't ask questions, that's not the agent's problem – provided the agent is truthful in the issuance of the COI.

Contracts signed by the insured (lower tier) in no way involve the agent or require the agent to do anything for the upper tier. The contract is between the lower tier and upper tier contractors. The agent's job is to make every effort to obtain proper coverages (but the agent cannot always place what the upper tier wants) and advise the insured of the coverages they have and don't have (this should always be in writing).

When the agent is honest with the client and the holder, neither party can be victimized by detrimental reliance. If the contract requires specific coverages or clauses that cannot be provide (for whatever reason), the agent must notify its insured (no question about that). And, the COI cannot state that such coverage exists (or even intimate such existence of coverage) if these coverages or conditions cannot be obtained. Back to the honesty requirement. The safest wording is, “Coverage is provided as per forms and endorsements listed on the attached declarations page."

There is no standard against which information contained in the COI is to be judged, unless the agent creates a detrimental reliance by adding unsupported wording to the COI. In its most base (and intended) form, a COI gives the holder no specifics about coverage because it's not intended for any purpose other than to confirm a policy exists.

Applying the truth that a COI is nothing but proof coverage is in place, agents should never positively or negatively attest to any provisions in the policy. In ACORD's words, the purpose of the COI is to provide information and the only information a COI can and should “certify" is that a policy exists. An agent gets in trouble, and rightfully should get in trouble, when:

The description of operations is used to state that certain coverages are in place or that certain exclusions don't exist (“No residential construction exclusions").
The agent attests to provisions or endorsements that don't exist (CG 20 10 11 85).
The agent puts something stupid (a technical term) in the description of operations such as, “Coverage is provided as per contract," or “Notwithstanding any policy provision to the contrary…," or any phrase that begins with “Regardless," and so on.
The agent makes an attempt to generalize the policy.
The agent completes an addendum request for information.

At the crux of the COI issue is any information the agent places in the COI's Description of Operations block that might create a detrimental reliance on the part of the holder. Note the title of the box, “Description of Operations / Locations / Vehicles;" it does not say, “Description of Coverage." Only one coverage section references the Description of Operations box – Workers' Compensation regarding whether individuals are excluded. No other coverage section points to this block.

Ultimately, the ONLY coverage information agents should provide is the information laid out in each coverage section. Nothing else. No pontification about coverage, no guarantee that it meets any standard, only that there is a policy with specific effective dates and the limits specified on the COI.

Last warning, be careful with the Additional Remarks form (ACORD 101). The same rules apply with the use of this form.

Let's end by finally answering the question, “what does an agent owe a certificate holder"? The short answer is – NOTHING! The agent has no contractual relationship with or responsibility to the certificate holder; the holder is an outside party. The only duties agents owe certificate holders are truthfulness and responsiveness (when they have questions). Agents are NOT charged with doing anything FOR holders or explaining anything the holder doesn't question.

All duties, including those related to COIs, are to the agent's client – the insured.

Last Updated: May 10, 2019