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Changes to Texas Certificate of Insurance Law

December 7, 2011 By

texas capitol certificate of insurance change

Find out how recent legislative changes affect Texas certificates of insurance.

If you are a contractor in Texas, you need to be aware that the law regarding certificates of insurance (COIs) has changed. Property Insurance Coverage Law.com reports that the Texas Legislature passed a bill this past legislative term that adds “a new chapter to the Texas Insurance Code.”

Senate Bill 425, which took effect on September 1st of this year, will formally apply to all certificates of insurance issued on or after January 1, 2012.  The new law states that “the Texas Department of Insurance (TDI) [must] approve certificates of insurance in connection with casualty and property policies.”

Because differences often existed between certificates of insurance and actual insurance policies, the TDI did not approve certificates of insurance prior to the passage of Senate Bill 425. Unfortunately, this situation gave rise to costly litigation. Court cases have since held that “certificates of insurance are issued for informational purposes alone and cannot alter the terms of coverage provided by an insurance policy.”

According to the new law, a certificate of insurance:

  • cannot convey a contractual rights under any circumstances
  • does not “amend, extend or alter the coverage afforded under a policy”
  • confers no  “new or additional rights beyond the policy”

A COI form “must now be filed and approved by the Texas Department of Insurance.” The penalties for noncompliance are stiff: anyone found to have broken the law can be fined $1000 for each infraction. Moreover, “an insurer or agent who violates this chapter will be subject to cease and desist orders, injunctive relief, civil penalties, or any combination of those punishments.”

Knowledge is power: the more you know, the better off you’ll be in the long run, especially if you own and run your own business. Addressing any Texas COI concerns you may have with the specialists at Statewide Insurance will give you the peace of mind you deserve.

 

 

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About Certificates of Insurance

November 21, 2011 By

certificates of insurance statewide insurance brokers

Certificates of insurance are available via statewide insurance brokers.

As a contractor, you know how important it is to carry liability insurance.  You should also have certificates of insurance (COIs) as well, since you never know when a client may request information about specific insurance policies you carry in the event  your company incurs losses on a specific job.

According to the website Mondaq.com, a COI will have a record of the following information:

  • the issuer of the COI (this is usually the insurance agent)
  • the name of the person covered by the policy
  • the name of the insurer or insurers
  • the type of insurance
  • the policy number, policy effective date and policy expiration date
  • the limits of coverage
  • any operations, locations, vehicles and/or exclusions added by endorsement
  • the name of the party to whom the certificate is issued
  • cancellation

No standard COI form exists. However, “the predominant form is one of dozens designed and copywritten by the ACORD Corporation, [which] designs forms for specific insurance risks and files them with state insurance departments.” Since ACORD periodically revises its forms, you should take care when requesting a specific one as it may be out of date.

Be aware that “even though you are listed as a certificate holder, you may not be covered by the policy: you must be added as an additional insured to the policy by rider or amendment.” ACORD has created “numerous forms for specific industries and risks [so] it is important to review the specific form as it often contains policy exclusions or other coverage limitations.”

COI forms can be be confusing: consult with your risk manager or insurance agent if you have any questions. Remember that if any COI you have is not issued in accordance with your contractual obligations, questions could be raised regarding liability, which could result in claims and costs you hadn’t anticipated.

For Certificates of Insurance, contact Statewide Insurance Brokers at 888-258-0272.
Filed Under: Certificates of Insurance Tagged With: ,

Certificates of Insurance

June 18, 2011 By

Certificate of Insurance: What is it exactly?

There are documents containing important information that many business owners use. Information withheld in these documents, like the certificate holder’s general information and legal criteria coverage, is called a Certificate of Insurance.

Certificates of Insurance are often traded:

While these documents are not insurance, they work as a glimpse of what the insured company holds. They are often traded during business transactions as assurance that the company in question does have the proper insurance necessary to conduct business. It’s not ideal for companies to trade actual insurance policies. There is valuable information in those documents that are typically kept private. Plus, it would take achingly long just to review a policy and this isn’t necessary either.

What a Certificate of Insurance states:

The certificate of insurance states, generally on one page, that the contracting company has the necessary insurance to provide services, personnel or materials for another business.

The certificate also states that a specific insurance coverage is currently in effect. Let’s say a company has a contract to demolish an un-used office building. The persons seeking service from the demolition company will request this form of certificate. It ensures that the contractor will keep appropriate insurance coverage to protect them against any potential liability. While it is not insurance itself, it serves as an ‘OK’ to proceed.

When a new Certificate of Insurance is required:

Anytime an insurance policy is renewed by a company, a new certificate is required. Meaning, the previous certificate of insurance is no longer effective. A new one is needed each time a renewal happens. This must be done even if there are no changes made to the policy.

The certificate must reflect the same expiration dates as the policy in order to be effective. Also, when changes are made to your policy, it is probably a good idea to request a new certificate. This way your certificate reflects all coverage, include the change, in its documentation.

There is a slight drawback to a Certificate of Insurance:

There is a slight drawback to a certificate of insurance. While they work great for assuring a company that you have proper insurance, they only provide minimal information of the content on your policy. So, a company you want to do business with may need additional supporting documents to verify anything on your certificate.

Some items or facts may be unclear on the company’s certificate and need to be matched against supporting documents. Whenever a business trade happens and these questions occur, always look into the documentation further. Never simply take anything for granted based on the general information supplied on the certificate.

Filed Under: Certificates of Insurance