N.Y., Mass. Adopt Certificates of Insurance Law
New York and Massachusetts in January became the latest states to enact laws to prohibit improper use of certificates of insurance.
On Jan. 28, New York Gov. Andrew Cuomo signed into law a bill (A.9590/S.6545-A) that would standardize the practice of using the certificates of insurance.
“The new law quite simply standardizes the practice of certificates of insurance, and requires that the certificates reflect only the coverages present in the underlying policies,” said Matthew Guilbault, director of government and industry affairs for the Professional Insurance Agents of New York (PIANY).
PIANY has been leading the campaign over several years, joined by industry groups in the insurance, construction and legal trades to regulate and standardize the use of certificate forms. Guilbault said the new law would prohibit anyone from requesting or requiring that the certificate add language that does not reflect the coverages in the underlying policy. The law is scheduled to go into effect in mid-February after the legislature makes a minor change to the bill’s language, according to PIANY.
There are now close to 25 states around the country that have adopted laws to prohibit the improper use of certificates.
And in Massachusetts, a certificates of insurance bill (S.B.2402) was signed into law on Jan. 7 by then-Gov. Deval Patrick before he left office. The bill is scheduled to take effect on April 7.
“What the bill does is, it prohibits any person from preparing or issuing a certificate of insurance that contains false or misleading information concerning the underlying policy,” said Daniel Foley, vice president of government affairs at Massachusetts Association of Insurance Agents (MAIA), an agency association that has actively supported the bill.
Foley said this bill would also apply to third parties. He explained that these third parties – such as general contractors hiring subcontractors or banks reviewing loan applicants – often request that information be put on a certificate that is beyond what the policy covers. “This new law allows the Division of Insurance to go after third parties who make these requests, and it allows commissioner to issue cease and desist orders,” said Foley.