senate Bill S6545

Signed by Governor Amended

Relates to certificates of insurance

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Bill Status


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

  • 04 / Feb / 2014
    • REFERRED TO INSURANCE
  • 10 / Feb / 2014
    • 1ST REPORT CAL.150
  • 11 / Feb / 2014
    • 2ND REPORT CAL.
  • 26 / Feb / 2014
    • ADVANCED TO THIRD READING
  • 06 / May / 2014
    • AMENDED ON THIRD READING 6545A
  • 19 / May / 2014
    • PASSED SENATE
  • 19 / May / 2014
    • DELIVERED TO ASSEMBLY
  • 19 / May / 2014
    • REFERRED TO INSURANCE
  • 10 / Jun / 2014
    • SUBSTITUTED FOR A9590
  • 10 / Jun / 2014
    • ORDERED TO THIRD READING RULES CAL.97
  • 10 / Jun / 2014
    • PASSED ASSEMBLY
  • 10 / Jun / 2014
    • RETURNED TO SENATE
  • 30 / Dec / 2014
    • DELIVERED TO GOVERNOR
  • 29 / Jan / 2015
    • SIGNED CHAP.552
  • 29 / Jan / 2015
    • APPROVAL MEMO.37

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:
S6545
S6545A
Legislative Cycle:
2013-2014
Law Section:
Insurance Law
Laws Affected:
Add Art 5 ยงยง501 - 505, Ins L

Sponsor Memo

BILL NUMBER:S6545

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 and
other entities 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, knowingly 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, the
NYS inspector general, and other appropriate entities.

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 tears 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 authorities and corporations, as well as to producers. In
the circular letter, the department acknowledges that these government
agencies were making requests for improper certificates and advised
insurance producer 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.


LEGISLATIVE HISTORY:

S.5804 of 2012-13 veto message number 257 of 2013
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
________________________________________________________________________

                                  6545

                            I N  S E N A T E

                            February 4, 2014
                               ___________

Introduced  by  Sen.  SEWARD -- read twice and ordered printed, and when
  printed to be committed to the Committee on Insurance

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.
  (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.

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
                                                           LBD13740-02-4

S. 6545                             2

  (E)  "PERSON"  MEANS ANY INDIVIDUAL, PARTNERSHIP, CORPORATION, ASSOCI-
ATION, OR OTHER LEGAL ENTITY, BUT SHALL  NOT  INCLUDE  ANY  GOVERNMENTAL
ENTITY, AS THAT TERM IS DEFINED IN THIS SECTION.
  (F)  "GOVERNMENTAL ENTITY" MEANS ANY PUBLIC ENTITY AS DEFINED IN PARA-
GRAPH 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.
  (G) "POLICYHOLDER" MEANS A PERSON WHO HAS CONTRACTED WITH  A  PROPERTY
OR CASUALTY INSURER FOR INSURANCE COVERAGE.
  S  502.  PROHIBITIONS.  (A)  NO  PERSON  OR  GOVERNMENTAL ENTITY SHALL
PREPARE, ISSUE, REQUEST, OR REQUIRE THE ISSUANCE  OF  A  CERTIFICATE  IF
SUCH  PERSON OR GOVERNMENTAL ENTITY KNOWS THAT SUCH CERTIFICATE DOES NOT
COMPLY WITH THE FOLLOWING PROVISIONS:
  (1) THE CERTIFICATE  IS  A  STANDARD  CERTIFICATE  OF  INSURANCE  FORM
PROMULGATED  AND  AUTHORIZED  FOR USE BY THE ASSOCIATION FOR COOPERATIVE
OPERATIONS RESEARCH AND DEVELOPMENT (ACORD) OR  THE  INSURANCE  SERVICES
OFFICE (ISO);
  (2)  THE  CERTIFICATE  IS  A FORM PROMULGATED BY THE INSURANCE COMPANY
THAT HAS UNDERWRITTEN THE POLICY REFERENCED IN THE CERTIFICATE OF INSUR-
ANCE; OR
  (3) THE CERTIFICATE IS  A  FORM  PREPARED,  ISSUED,  OR  REQUESTED  AS
EVIDENCE  OF  INSURANCE  IN  CONNECTION WITH A COMMERCIAL LENDING TRANS-
ACTION IN WHICH THE UNDERLYING PROPERTY SERVES AS THE PRIMARY COLLATERAL
SECURING THE BORROWER'S REPAYMENT OF THE LOAN, INCLUDING, BUT NOT LIMIT-
ED TO A FORM PROMULGATED BY THE MORTGAGE BANKERS ASSOCIATION (MBA).
  (B) NO PERSON OR GOVERNMENTAL ENTITY SHALL ALTER, MODIFY, REQUEST,  OR
REQUIRE  THE  ALTERATION  OF  A  CERTIFICATE OF INSURANCE FORM WHEN SUCH
PERSON OR GOVERNMENTAL ENTITY KNOWS THAT SUCH ALTERATION,  MODIFICATION,
REQUEST OR REQUIREMENT IS IN VIOLATION OF THIS ARTICLE.
  (C)  NO  PERSON OR GOVERNMENTAL ENTITY 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  WHEN
SUCH  PERSON OR GOVERNMENTAL ENTITY KNOWS SUCH REQUEST OR REQUIREMENT IS
IN VIOLATION OF THIS ARTICLE.
  (D) NO PERSON OR GOVERNMENTAL ENTITY SHALL REQUEST OR  REQUIRE  EITHER
IN  ADDITION  TO  OR  IN  LIEU OF A CERTIFICATE OF INSURANCE, AN OPINION
LETTER, WARRANTY, STATEMENT, SUPPLEMENTAL CERTIFICATE OR ANY OTHER DOCU-
MENT OR CORRESPONDENCE THAT SUCH PERSON OR GOVERNMENTAL ENTITY KNOWS  TO
BE  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  OR  GOVERNMENTAL  ENTITY  SHALL  REQUEST OR REQUIRE A
CERTIFICATE OF INSURANCE THAT SUCH PERSON OR GOVERNMENTAL  ENTITY  KNOWS
CONTAINS  REFERENCES  TO  A CONTRACT OTHER THAN THE INSURANCE POLICY, OR
WARRANTS 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

S. 6545                             3

INSURANCE  POLICIES  REFERENCED  IN  THE  CERTIFICATE  COMPLY  WITH  THE
REQUIREMENTS OF SUCH CONTRACT.
  (F) NO PERSON OR GOVERNMENTAL ENTITY SHALL REQUEST OR REQUIRE, PREPARE
OR  ISSUE  A  CERTIFICATE  OF INSURANCE THAT SUCH PERSON OR GOVERNMENTAL
ENTITY KNOWS:   (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)
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. (A) THE SUPERINTENDENT SHALL HAVE THE POWER UNDER
SECTION FOUR HUNDRED FOUR 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.
  (B) THE OFFICE OF THE STATE INSPECTOR GENERAL  SHALL  HAVE  THE  POWER
PURSUANT  TO SECTION FIFTY-THREE OF THE EXECUTIVE LAW TO INVESTIGATE ANY
GOVERNMENTAL ENTITY THAT IS CONSIDERED A COVERED  AGENCY  UNDER  SECTION
FIFTY-ONE  OF THE EXECUTIVE LAW THAT HAS BEEN OR IS ENGAGED IN AN ACT OR
PRACTICE PROHIBITED BY  THIS  ARTICLE.  IF  A  GOVERNMENTAL  ENTITY  NOT
CONSIDERED A COVERED AGENCY UNDER SECTION FIFTY-ONE OF THE EXECUTIVE LAW
HAS BEEN OR IS ENGAGED IN AN ACT OR PRACTICE PROHIBITED BY THIS ARTICLE,
THAT  ENTITY'S  INSPECTOR GENERAL, OTHER COMPLIANCE OR INTERNAL INVESTI-
GATIVE UNIT OR OTHER OFFICIAL OR ENTITY WITH PROPER AUTHORITY SHALL HAVE
THE POWER TO INVESTIGATE SUCH ENTITY.
  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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