What Are Certificates of Insurance and What Do They Mean to You?
Certificates of insurance are informational documents issued by or, more commonly on behalf of, an
insurance company. Insurance agents commonly issue the certificate of insurance on behalf of the
insurance company. Certificates of insurance are one- or two-page forms. Businesses commonly give
them to other businesses or government entities for which they are doing work. The forms summarize the
terms of the businesses’ insurance policies. They are not contracts. They do not alter or amend an
insurance policy. They are merely snapshots of the basic insurance policy coverage and limits at the time
the certificates are issued. Most importantly, certificates of insurance do not convey any contractual
rights to the certificate holder. The insurance industry standard certificate of insurance is the ACORD 25
form but there are other forms that may be requested.
Businesses frequently enter into construction or service contracts, loan agreements, leases and other
contracts that include certain insurance and indemnity requirements that must be evidenced by a
certificate of insurance, a snapshot of the insurance policy coverage and limits. It is a common practice to
request a certificate of insurance to provide evidence of the insurance coverage in place. The requestor
of the certificate of insurance is known as the certificate holder.
In recent years, certificate holders have requested additions on the certificate that cannot be met.
Problems often arise when a contract makes demands that are, for all practical purposes, impossible to
meet. Examples of such requests are: requests for insurance for losses or damages that are not
insurable, requests that require specific wording that is not included in the insurance policy, and requests
for coverage that is not available to be purchased.
To address these problems, states are enacting certificate-specific statutes or regulations or their
insurance departments are issuing regulatory directives that govern the use of certificates of insurance.
New York has a new law governing the use of certificates of insurance. It was signed into law by
Governor Cuomo on January 29, 2015 and will be effective July 28, 2015. Failure to comply with the
new law could result in penalties of $1,000 for the first offense and $2,000 for each subsequent offense.
The Independent Insurance Agents & Brokers of NY (IIABNY), a statewide trade association representing
independent insurance agents and brokers, championed the new law in an effort to clear up confusion
and standardize the practice of issuing certificates of insurance. The new law provides guidance on what
you can and cannot ask for as a certificate holder. The new law also limits the types of certificates of
insurance that are acceptable. Any form used must be pre-approved by the Department of Financial
Services (DFS).
To assist those in the business community that may be a requestor or receiver of a certificate of
insurance, IIABNY has created a one-page fact sheet on the new law.