Illinois Insurance Director Michael McRaith recently announced a statewide effort to enforce Illinois’ statutes regarding certificates of insurance and warns producers and companies that violations can result in significant penalties.
“The issue of amending or altering certificates of insurance that do not represent actual policy language has been increasing and is a misrepresentation to commercial insureds of coverages purchased,” said Michael McRaith, director, Illinois Division of Insurance. “The Division of Insurance is pleased to work with the Professinal Independent Insurance Agents of Illinois (PIIAI) to eliminate this practice.”
“We support the Director McRaith in his effort to uncover all of those in our industry who have perpetrated this fraud. These practices have gone on too long. They compromise professional standards and put agencies, companies and clients at risk,” said Tom Mollenhauer, Government Relations chair, PIIAI.
According to the memorandum, “Certificates of Insurance must clearly and accurately state the insurance coverage provided. Any certificate issued by an insurer, broker or producer that obscures or misrepresents the insurance coverage provided under the insurance policy is a violation of the Illinois Insurance code and may subject the issuer to administrative penalties and/or license suspension or revocation.”
“Anything that is not actually stated in the insured’s policies cannot be shown on a certificate of insurance- period,” said Chuck Schramm, CIC, CPCU, AAI, ARM, CRM, nationally known instructor and consultant on certificates. “Any notice provision which binds the insurer when such provision is in the policy is not in compliance.”
For example, if no endorsement has been added to the policies the certificate cannot show either primary noncontributory or additional insureds. In addition, an indemnification agreement or any other non-policy language can not be added to a certificate. There is no endorsement to include a contract’s indemnification clause in the definition of “insured contract.” Moreover, none of the preprinted language on the certificate may be deleted.
Producers found in violation may have their license placed on probation, suspended or revoked. In addition to suspension or revocation of a license a person may, after hearing, be subject to civil penalties of up to $10,000 for each cause of action.
Additional information on non compliant practices and penalties can be found on the IIABA (Big I) Virtual University site, http://www.iiaba.net/vu
“In Illinois 27 percent of professional liability claims are directly related to certificates of insurance, the number one source of errors and omissions claims,” said Dennis Garrett, PIIAI vice president, Errors & Omissions Program. “These practices end up costing everyone in the form of higher premiums as well as time lost.”
The Division of Insurance is requesting that all violations be reported to the Producer Regulatory Unit. For additional information or to report a violation, contact Mike Teer, chief examiner, 217-782-1784. It is important to note that all such reports are handled confidentially.
In conjunction with the DOI announcement, the PIIAI has scheduled educational seminars on Best Practices for Certificate of Insurance.
Classes will be held April 17 and May 29. For additional information on the seminars, or to register, visit: www.piiai.org/education
The Professional Independent Insurance Agents of Illinois is an association representing independent insurance agents throughout the state. PIIAI membership is comprised of 1,500 insurance agencies representing 12,000 licensed independent agents engaged in all facets of the insurance industry, including property, casualty, life and health.
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