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.