It has been rumored that certificate of insurance account for 1 out of each 25 errors and omissions liability claims against insurance agents. Despite all the disclaimers written on certificates, some folks prefer to read them as complete representations of all the limits, terms and conditions of the policies listed on them. A one-page document can’t be such a thing. Nevertheless, incomplete data on a certificate will get an office a lawsuit.
A North Carolina agency had a trucking company for a client. The connection between them started in 2016 when the insured gave the agency a vehicle schedule and a duplicate of its current business car policy. Supported with this information, the agent obtained a replacement policy for the date of March 11, 2017, to 2018.
The company obtained a number of its vehicles from a rental company. Some were provided with long-run leases, whereas others were rented for shorter periods. The 2017-18 policy scheduled the hired vehicles however not the rentals. The policy provided physical damage coverage on the scheduled vehicles, but not on the rented ones.
In late 2017, the insurance carrier for the rental company contacted the agency and requested a certificate of insurance that may show the car insurance limits applicable to the leased and rented vehicles, together with the applicable physical injury coverage deductibles. The court opinion doesn’t specify the document that the agency used, however it seems that they will have issued an Accord twenty-five Certificate of liability insurance since the certificate “did not mention collision coverage.”
The carrier rejected the certificate and requested a replacement one that will show the liability limits and physical damage deductibles. The agency inserted the words “Specified Perils/Collision Deductibles: $2500” to the certificate and sent it back. The agency failed to give a duplicate to its insured.
The insured renewed the policy for the 2018-19 term, and the agency sent a brand-new certificate to the rental company’s carrier. The certificate was just like the previous one aside from higher deductibles. Again, the agency failed to copy the insured on the certificate.
That summer, the trucking company rented a truck from the rental company for a brief term. The truck was broken during a collision. The insurance company denied coverage for the following claim since the policy did not insure rented vehicles for physical damage.
The insured sued the agency for a range of complaints. The court ruled in the agency’s favor, and the insured appealed.
The court noted that the insured’s former policy, what they’d given to the agency to model, failed to give physical damage coverage on short rentals. They additionally rejected the insured’s argument that the two certificates sent to the insurance carrier created extra obligations, because the insured did not receive them and thus couldn’t trust them. What they ought to have relied on, the judges said, was the policy in their possession. The trial court’s ruling was upheld.
The agency might have used an incorrect certificate form. The ACORD 23, Vehicle Or Equipment Certificate Of Insurance, is intended to list the coverages for a personal vehicle, including liability and physical damage coverages and deductibles. If the agency used this form for the truck in question and correctly showed no physical damage coverage, the carrier probably would have notified the rental company, who would successively have asked its client to shop for physical damage coverage on the truck. That may have stopped the whole legal dispute.
Certificates of insurance are often an E&O danger for agencies. Utilizing the right form with accurate data will lessen and prevent issues like this one.