Kerfuffle Over Certificates and Cancellation Notices
Big "I" seeks to understand Chubb position on new endorsement.
Chubb Group of Insurance Companies’ communication to its producers just before Thanksgiving about its new procedure for having agents handle third-party notices of cancellation for all but a few circumstances has generated inquiries to the Big “I” from all over the country that are too numerous to count. Here’s a summary of Chubb’s new approach, the concerns it has raised for Big “I” members, the actions Big “I” is taking to address those concerns and some information/resources available exclusively through the Big “I” on certificates of insurance.
Summary of Chubb’s New Approach
Chubb’s communication indicates it is in “response to the recent approved changes to the ACORD certificates of insurance” form. It explains that Chubb will: (1) send notice of cancellation, non-renewal and conditional renewal to the first named insured, named insureds and other parties (like state and federal agencies) when required by law; (2) for commercial property insurance, send notice of cancellation to a scheduled mortgage holder if the notice is required by the policy; and (3) when it cancels or non-renews a policy and where required by a written contract, it will endorse commercial property and casualty policies to provide notice of cancellation and non-renewal to a scheduled governmental entity. And in these instances, Chubb also will send a copy of the notice to the producer of record.
Chubb’s communication went on to explain that for all other circumstances, the company believes “the most logical solution is for the producer of record (“Producer”) to send notice to third parties.” The stated reasons were that the Producer:
• “often consults on insurance requirements listed in insured contracts with third parties”;
• “is in the best position to help manage or limit the number of entities in which an insured agrees to provide notice”; and
• has knowledge when the Chubb policy is replaced with a similar and satisfactory alternative and thus “is in the best position to communicate” with certificate holders.
Under Chubb’s approach described above, an endorsement will be attached to the policy whereby the first named insured authorizes the Producer to send notice of cancellation or non-renewal to a certificate holder or other third party. Workers’ compensation is not covered by this since it is compulsory, so no endorsement is needed.
Concerns About the New Approach
There have been a myriad of questions raised by agencies of all sizes about the implications of this new approach to handling certificates of insurance. Some of the most frequently asked questions are about: the errors and omissions implications of this responsibility being shifted to producers; if producers’ agency management or other systems can monitor, track and generate notices on the scale that will be required; the amount of staff required to handle the work load; producers’ inability to control decisions by insureds regarding who will be promised notice; producers’ lack of authority and influence over the contractual requirements between insureds and others; and how to give notice following cancellation decisions sent directly to the company either by the insured, for non-payment of premium or following a change in producer that the prior producer is not informed about.
Big “I” Actions
The Big “I” has been deluged with questions from around the country on this issue. They have come in to the Virtual University, technical affairs staff, the association’s insurance agency, the Big “I” professional liability program management, the executive office and the general counsel’s office. Big “I” executive vice president and general counsel, Debra Perkins, has coordinated with staff in each of those areas as well as with the government affairs team to assure our understanding of the issue is comprehensive. Perkins has since talked with several Chubb senior executives to express Big “I” concerns and to seek to understand Chubb’s goals relative to this issue. Chubb has been very responsive to that outreach and has agreed to continue to work with the Big “I” on this issue in an effort to reach a resolution to meet the needs of all impacted. Perkins was assured that Chubb understands the time sensitivity and importance of this issue, and the Big “I” will update members as further information is obtained.
Certificates of Insurance Information/Resources
The Big “I” staff has done extensive work on certificates of insurance to date, and with the recent ACORD changes, it would appear more is to come in this area.
Members seeking general information on certificates of insurance may be interested in the following:
1. Sept. 29, 2007 IIABA Policy Statement on Certificates
2. March 2008, IIABA/Virtual University White Paper on Certificates of Insurance
3. 2010 IIABA Model Law on Certificates of Insurance
All of the above resources and more (articles, newsletters, podcasts and webinars) are available on the Big “I” Virtual University, Certificates of Insurance Resource Section, accessed by logging in as a member to www.independentagent.com. Also, since laws and regulations for certificates are state-specific, members should contact their state association for more information as needed. As another value-added benefit of membership, Big “I” members can ask specific questions about this issue through the Ask an Expert service on the Virtual University site at www.independentagent.com/vu. Members needing access to up-to-date ACORD forms can obtain them as part of the services offered via the Big “I” Virtual Risk Consultant at www.independentagent.com/vrc.
Debra Perkins (debra.perkins@iiaba.net) is Big I executive vice president and general counsel. Paul Buse (paul.buse@iiaba.net) is president of Big “I” Advantage® and a licensed p-c agent. Bill Wilson (bill.wilson@iiaba.net) is Big “I associate vice president, Big I Virtual University.
