Delaware Bill Adds Teeth to Certificate of Insurance Rules

Delaware legislature on March 25 passed HB 104 (“An Act to Amend Title 18 of the Delaware Code Relating to Certificates of Insurance”) that aims to curtail the improper use of certificates of insurance.

Delaware Association of Insurance Agents & Brokers, a trade group that has been championing the measure, applauded the bill’s passage. The group said HB 104 would give teeth to certificate of insurance regulations.

As Insurance Journal went to press, Gov. Jack Markell was expected to sign the legislation. It will take effect 90 days following his signature.

In Delaware, there were existing insurance statutes and regulations that generally prohibited producers from misrepresenting the coverage provided by a policy. But this new law would further clarify those statutes and specifically define a certificate of insurance and its appropriate use, said Rick Russell, president and CEO of Delaware Association of Insurance Agents & Brokers.

Additionally, the new law deals for the first time with the issue of third parties by prohibiting a person from requesting the issuance of an inaccurate certificate of insurance.

Certificates of insurance misuse has been plaguing agents nationwide, Russell said. “In Delaware, the statutes just weren’t strong and clear enough,” he added. “All too often, law-abiding producers were losing business to the agent down the street who would meet improper demands related to certificates.”

HB 104 would make it unlawful to require, prepare, issue or provide a certificate of insurance containing false or misleading information. HB 104 amends Title 18 of the Delaware Code by prohibiting the:

• Request of a certificate that does not accurately reflect the underlying policy;
• Issue of a false or misleading certificate or one that purports to alter, amend or extend the coverage provided by the insurance policy; and
• Use of a certificate to warrant that a policy complies with the insurance or indemnification requests of a contract.

The legislation also enables the Delaware Department of Insurance to issue cease-and-desist orders and to assess fines against those who request false or misleading certificates.

“HB 104 confirms that a certificate in and of itself is not a policy and doesn’t independently confer rights,” said Russell.