senate Bill S3084A

Amended

Relates to the issuance of certificates of insurance

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Bill Status


  • Introduced
  • In Committee
  • On Floor Calendar
    • Passed Senate
    • Passed Assembly
  • Delivered to Governor
  • Signed/Vetoed by Governor
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actions

  • 29 / Jan / 2013
    • REFERRED TO INSURANCE
  • 04 / Mar / 2013
    • 1ST REPORT CAL.146
  • 05 / Mar / 2013
    • 2ND REPORT CAL.
  • 06 / Mar / 2013
    • ADVANCED TO THIRD READING
  • 20 / May / 2013
    • AMENDED ON THIRD READING 3084A
  • 29 / May / 2013
    • PASSED SENATE
  • 29 / May / 2013
    • DELIVERED TO ASSEMBLY
  • 29 / May / 2013
    • REFERRED TO INSURANCE
  • 11 / Jun / 2013
    • RECALLED FROM ASSEMBLY
  • 11 / Jun / 2013
    • RETURNED TO SENATE
  • 11 / Jun / 2013
    • VOTE RECONSIDERED - RESTORED TO THIRD READING
  • 11 / Jun / 2013
    • AMENDED ON THIRD READING 3084B
  • 21 / Jun / 2013
    • COMMITTED TO RULES
  • 08 / Jan / 2014
    • REFERRED TO INSURANCE

Summary

Relates to the issuance of certificates of insurance and requires the issuance of a certificate of insurance as a summary or evidence of property or casualty insurance.

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Bill Details

Versions:
S3084
S3084A
S3084B
Legislative Cycle:
2013-2014
Current Committee:
Senate Insurance
Law Section:
Insurance Law
Laws Affected:
Add Art 5 ยงยง501 - 505, Ins L
Versions Introduced in 2011-2012 Legislative Cycle:
S4425B

Sponsor Memo

BILL NUMBER:S3084A

TITLE OF BILL: An act to amend the insurance law, in relation to
certificates of insurance

PURPOSE:

To establish standards for the proper issuance of certificates of
insurance and to authorize the department of financial services to
impose penalties against any person who violates the provisions of
this article.

SUMMARY OF PROVISIONS:

Section 1 adds a new article five to the insurance law, which sets
forth specific standards for the issuance of certificates of
insurance.

Section 501 provides for definitions of the terms "certificate",
"certificate of insurance", "certificate holder", "insurance
producer", "insurer", "person", and "policyholder".

Section 502 sets forth prohibited practices, including, altering or
modifying a certificate of insurance form, requesting the issuance of
a certificate of insurance that contains false or misleading
information, issuing a certificate of insurance that alters the terms
or coverage provided by the insurance policy, issuing an opinion
letter or similar document that is inconsistent with this section.
However, an accompanying addendum with clarifying information is
permissible.

Section 503 provides for the applicability of the provisions of this
section.

Section 504 provides for enforcement powers of the superintendent.

Section 505 provides for rules and regulations to be adopted by the
superintendent.

Section 2 of the bill provides for a 90 day effective date.

EXISTING LAW:

Under current law, an insurance producer may not add terms or clauses
to a certificate of insurance which alter, expand or otherwise modify
the terms of the actual policy, unless authorized by the insurer which
has filed an appropriate endorsement with the Department of Financial
Services. The department may take disciplinary actions against
producers that engage in this practice.

However, those parties that make the request for a certificate that
alters the terms of the policy are not regulated by the Department of
Financial Services and the department has no authority to prohibit
them from demanding improper certificates of insurance.

Additionally, existing law does not define certificates of insurance
or sets standards for forms.


JUSTIFICATION:

Insurance producers are often asked by their commercial insurance
clients to provide certificates of insurance to various third parties.
A certificate of insurance is commonly used in business transactions
as proof that a policy of insurance is in effect. It is a simple
document that merely summarizes the essential terms, conditions, and
duration of the contract of insurance that is in effect between the
insured and the insurer. Usually, the request for a certificate is
made by a party the insured has contracted with to provide services,
including city, state, and municipal agencies, public authorities, as
well as private contractors.

A problem has existed for many years where various government agencies
have required, as a condition of doing business, that an insured
supply evidence of insurance on preprinted forms supplied by the
agency. These forms often times alter, expand or modify the terms of
the subject policy. In other cases, government agencies or private
contractors may demand that terms be added to the standard ACORD
certificate of insurance form which do not appear in the insurance
policy . For example, requests are often made for the certificate to
include "hold harmless" agreements or other clauses that alter the
language of the policy, as well as statements that the wording of the
certificate will control in the event of any inconsistency or conflict
between the certificate and the policy.

An insurance producer that is asked to provide these types of altered
certificates may not legally do so. The Department of Financial
Services has made it clear that an insurance producer may not add
terms or clauses to a certificate of insurance which alter, expand or
otherwise modify the terms of the actual policy unless authorized by
the insurer which has filed an appropriate endorsement with the
Superintendent of Financial Services. The department may seek
disciplinary measures against producers who do this.

Insurance producers are being placed in an untenable position. If they
do not comply with the request to issue an improper certificate, their
insurance client will not be allowed to perform work for the party
asking for the certificate. Unfortunately, an insurance producer that
complies with the law and refuses to issue an improper certificate
will often lose the client, who will, find another insurance producer
willing to ignore the law and issue the improper certificate.

The department has recognized this problem over the years and has
issued numerous opinions and two circular letters on this topic
(Circular Letter 8 (1995) and Circular Letter 15 (1997)). Circular
letter 15 was also issued to city, state, and municipal agencies and
other public authorizes and corporate, as well as to producers. In the
circular letter, the department acknowledges that these government
agencies were mating requests for improper certificates and advised
insurance producers that they may not provide them.

Despite the department's efforts, government agencies continue to
insist upon certificates of insurance that do not merely act as
evidence of insurance, but seek to modify the terms and conditions of
coverage.


This bill will remedy this problem by making it a violation of law for
any person to request the issuance of a certificate of insurance that
contains any false or misleading information. The bill gives the
Superintendent of Insurance the authority to impose penalties against
those who violate the law, including any person who requests the
issuance of a certificate that does not comport with the requirements
of the bill.

LEGISLATIVE HISTORY:

S.4425-B of 2011-12

FISCAL IMPLICATIONS:

None.

EFFECTIVE DATE:

90 days after it shall have become a law.

view bill text
                    S T A T E   O F   N E W   Y O R K
________________________________________________________________________

                                 3084--A
    Cal. No. 146

                       2013-2014 Regular Sessions

                            I N  S E N A T E

                            January 29, 2013
                               ___________

Introduced  by  Sens.  SEWARD,  FARLEY, LARKIN -- read twice and ordered
  printed, and when printed to be committed to the Committee  on  Insur-
  ance  --  reported favorably from said committee, ordered to first and
  second report,  ordered  to  a  third  reading,  amended  and  ordered
  reprinted, retaining its place in the order of third reading

AN ACT to amend the insurance law, in relation to certificates of insur-
  ance

  THE  PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM-
BLY, DO ENACT AS FOLLOWS:

  Section 1. The insurance law is amended by adding a new article  5  to
read as follows:
                                ARTICLE 5
                        CERTIFICATES OF INSURANCE
SECTION 501. DEFINITIONS.
        502. PROHIBITIONS.
        503. APPLICABILITY.
        504. ENFORCEMENT.
        505. RULES AND REGULATIONS.
  S 501. DEFINITIONS. FOR PURPOSES OF THIS SECTION:
  (A)  "CERTIFICATE" OR "CERTIFICATE OF INSURANCE" MEANS ANY DOCUMENT OR
INSTRUMENT, NO MATTER HOW TITLED OR  DESCRIBED,  WHICH  IS  PREPARED  OR
ISSUED  BY  AN  INSURER OR INSURANCE PRODUCER AS EVIDENCE OF PROPERTY OR
CASUALTY INSURANCE COVERAGE. "CERTIFICATE" OR "CERTIFICATE OF INSURANCE"
SHALL NOT INCLUDE A POLICY OF INSURANCE OR INSURANCE  BINDER,  AND  DOES
NOT AMEND, EXTEND OR ALTER THE COVERAGE PROVIDED BY THE POLICY OF INSUR-
ANCE TO WHICH THE CERTIFICATE MAKES REFERENCE, AND IS SUBJECT TO ALL THE
TERMS,  EXCLUSIONS  AND  CONDITIONS  OF  SUCH POLICY.   A CERTIFICATE OF
INSURANCE SHALL NOT CONFER TO ANY PERSON NEW OR ADDITIONAL RIGHTS BEYOND
WHAT THE REFERENCED POLICY OF INSURANCE EXPRESSLY PROVIDES.
  (B) "CERTIFICATE HOLDER" MEANS ANY PERSON, OTHER THAN A  POLICYHOLDER,
THAT IS IDENTIFIED ON THE CERTIFICATE AS A CERTIFICATE HOLDER.

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
                                                           LBD06628-08-3

S. 3084--A                          2

  (C)  "INSURANCE PRODUCER" HAS THE MEANING ASCRIBED TO IT BY SUBSECTION
(K) OF SECTION TWO THOUSAND ONE HUNDRED ONE OF THIS CHAPTER.
  (D)  "INSURER"  MEANS ANY PERSON "DOING AN INSURANCE BUSINESS" AS SUCH
PHRASE IS DEFINED IN SECTION ONE THOUSAND ONE HUNDRED ONE OF THIS  CHAP-
TER.
  (E)  "PERSON"  MEANS ANY INDIVIDUAL, PARTNERSHIP, CORPORATION, ASSOCI-
ATION, OR OTHER LEGAL ENTITY, INCLUDING ANY PUBLIC ENTITY AS DEFINED  IN
PARAGRAPH  FIFTY-ONE  OF  SUBSECTION (A) OF SECTION ONE HUNDRED SEVEN OF
THIS CHAPTER, ANY STATE AUTHORITY  AS  DEFINED  IN  SUBDIVISION  ONE  OF
SECTION  TWO  OF  THE  PUBLIC  AUTHORITIES  LAW,  ANY LOCAL AUTHORITY AS
DEFINED IN SUBDIVISION TWO OF SECTION TWO OF THE PUBLIC AUTHORITIES LAW,
AND ANY INTERSTATE OR INTERNATIONAL AUTHORITY AS DEFINED IN  SUBDIVISION
THREE OF SECTION TWO OF THE PUBLIC AUTHORITIES LAW.
  (F)  "POLICYHOLDER"  MEANS A PERSON WHO HAS CONTRACTED WITH A PROPERTY
OR CASUALTY INSURER FOR INSURANCE COVERAGE.
  S 502. PROHIBITIONS. (A) NO PERSON SHALL PREPARE, ISSUE,  REQUEST,  OR
REQUIRE THE ISSUANCE OF A CERTIFICATE UNLESS THE CERTIFICATE IS:
  (1)  A  STANDARD CERTIFICATE OF INSURANCE FORM PROMULGATED AND AUTHOR-
IZED FOR USE BY THE ASSOCIATION FOR COOPERATIVE OPERATIONS RESEARCH  AND
DEVELOPMENT (ACORD) OR THE INSURANCE SERVICES OFFICE (ISO);
  (2)  A FORM PROMULGATED BY THE INSURANCE COMPANY THAT HAS UNDERWRITTEN
THE POLICY REFERENCED IN THE CERTIFICATE OF INSURANCE; OR
  (3) A FORM PREPARED, ISSUED, OR REQUESTED AS EVIDENCE OF INSURANCE  IN
CONNECTION WITH A COMMERCIAL LENDING TRANSACTION IN WHICH THE UNDERLYING
PROPERTY SERVES AS THE PRIMARY COLLATERAL SECURING THE BORROWER'S REPAY-
MENT  OF  THE  LOAN, INCLUDING, BUT NOT LIMITED TO A FORM PROMULGATED BY
THE MORTGAGE BANKERS ASSOCIATION (MBA).
  (B) NO PERSON SHALL ALTER, MODIFY, REQUEST OR REQUIRE  THE  ALTERATION
OF A CERTIFICATE OF INSURANCE FORM.
  (C) NO PERSON SHALL REQUEST OR REQUIRE THAT A CERTIFICATE OF INSURANCE
FORM  CONTAIN  ADDITIONAL TERMS, CONDITIONS, OR LANGUAGE OF ANY KIND NOT
FOUND IN THE INSURANCE POLICY TO WHICH THE CERTIFICATE  MAKES  REFERENCE
OR TO AN ENDORSEMENT TO SUCH POLICY.
  (D)  NO  PERSON  SHALL  REQUEST OR REQUIRE EITHER IN ADDITION TO OR IN
LIEU OF A CERTIFICATE OF INSURANCE, AN OPINION LETTER, WARRANTY,  STATE-
MENT,  SUPPLEMENTAL  CERTIFICATE OR ANY OTHER DOCUMENT OR CORRESPONDENCE
THAT IS INCONSISTENT WITH THE PROHIBITIONS OF THIS SECTION.  HOWEVER, AN
INSURER OR INSURANCE PRODUCER MAY PREPARE OR  ISSUE  AN  ADDENDUM  TO  A
CERTIFICATE THAT CLARIFIES AND EXPLAINS THE COVERAGE PROVIDED BY A POLI-
CY  OF  INSURANCE  AND  OTHERWISE COMPLIES WITH THE REQUIREMENTS OF THIS
SECTION, PROVIDED SUCH AUTHORITY IS  GRANTED  TO  THE  PRODUCER  BY  THE
INSURER.
  (E) NO PERSON SHALL REQUEST OR REQUIRE THAT A CERTIFICATE OF INSURANCE
CONTAIN  REFERENCES  TO  A  CONTRACT OTHER THAN THE INSURANCE POLICY, OR
WARRANT THAT THE INSURANCE POLICIES REFERENCED IN THE CERTIFICATE COMPLY
WITH THE REQUIREMENTS  OF  A  PARTICULAR  CONTRACT  PROVIDED  HOWEVER  A
CERTIFICATE  MAY  INCLUDE  A  CONTRACT TITLE OR DESCRIPTION FOR THE SOLE
PURPOSE OF IDENTIFYING THE PROJECT FOR WHICH THE CERTIFICATE WAS ISSUED,
BUT SUCH INCLUSION SHALL NOT  BE  INTERPRETED  AS  WARRANTING  THAT  THE
INSURANCE  POLICIES  REFERENCED  IN  THE  CERTIFICATE  COMPLY  WITH  THE
REQUIREMENTS OF SUCH CONTRACT.
  (F) NO PERSON SHALL REQUEST, REQUIRE, PREPARE OR ISSUE  A  CERTIFICATE
OF  INSURANCE  THAT: (I) DOES NOT ACCURATELY STATE THE TERMS OF COVERAGE
PROVIDED BY THE POLICY OR POLICIES OF INSURANCE TO WHICH THE CERTIFICATE
MAKES REFERENCE; (II) PURPORTS TO ALTER, AMEND, EXTEND, OR  MISREPRESENT
THE TERMS OF COVERAGE TO WHICH THE CERTIFICATE MAKES REFERENCE; OR (III)

S. 3084--A                          3

PURPORTS  TO  CONFER  TO ANY PERSON NEW OR ADDITIONAL RIGHTS BEYOND WHAT
THE REFERENCED POLICY OF INSURANCE EXPRESSLY PROVIDES.
  S  503.  APPLICABILITY.  THE PROVISIONS OF THIS SECTION SHALL APPLY TO
ALL CERTIFICATE HOLDERS, POLICYHOLDERS, INSURERS,  INSURANCE  PRODUCERS,
OR  ANY  OTHER  PERSON  AND  TO CERTIFICATE OF INSURANCE FORMS ISSUED AS
EVIDENCE OF  INSURANCE  COVERAGES  ON  PROPERTY,  OPERATIONS,  OR  RISKS
LOCATED IN THIS STATE, REGARDLESS OF WHERE THE CERTIFICATE HOLDER, POLI-
CYHOLDER, INSURER, OR INSURANCE PRODUCER IS LOCATED.
  S  504.  ENFORCEMENT.    THE SUPERINTENDENT SHALL HAVE THE POWER UNDER
SECTION FOUR HUNDRED THREE OF THE FINANCIAL SERVICES LAW TO EXAMINE  AND
INVESTIGATE THE ACTIVITIES OF ANY PERSON THAT THE SUPERINTENDENT REASON-
ABLY BELIEVES HAS BEEN OR IS ENGAGED IN AN ACT OR PRACTICE PROHIBITED BY
THIS  ARTICLE.  THE  SUPERINTENDENT  SHALL HAVE THE POWER TO ENFORCE THE
PROVISIONS OF THIS SECTION AND IMPOSE ANY AUTHORIZED PENALTY  OR  REMEDY
AS  PROVIDED  UNDER SECTION FOUR HUNDRED EIGHT OF THE FINANCIAL SERVICES
LAW AGAINST ANY PERSON WHO VIOLATES THIS ARTICLE.
  S 505. RULES AND REGULATIONS. THE SUPERINTENDENT MAY  ADOPT  RULES  OR
REGULATIONS  AS  HE  OR  SHE  CONSIDERS  APPROPRIATE  TO  CARRY  OUT THE
PROVISIONS OF THIS ARTICLE.
  S 2. This act shall take effect on the ninetieth day  after  it  shall
have become a law.

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