Insurance Certificates and Opinion Letters

My last post about insurance certificates was almost two years ago.  At that time, the consensus seemed to be that issues regarding them were declining as all the interested parties became more familiar with Georgia’s law and regulations.  However, I learned from a recent participant in the Free Legal Service program that I run for members of the Independent Insurance Agents of Georgia that six years after they were enacted some people have still not gotten the message.

The agent contacted me about requests that he received “all the time” to provide a letter stating that his agency’s customer “has or can provide the required types and amounts of insurance coverage” specified in a contract to which the customer either was already or would become a party.  The agent was concerned that providing such a letter called for an opinion outside of the scope of his knowledge or duties and thus, could create a potential E&O exposure.  He was correct to be concerned about the potential liability exposure he would create by providing such a letter.  It could be the basis for a claim by the entity to which it was sent if what was said in the letter was not completely accurate.

Avoiding such a potential liability exposure is one reason not to send such a letter, but an even better reason is that it would be illegal to do so and could subject the agent to disciplinary action by the Insurance Commissioner’s Office.   O.C.G.A. Section 34-24-19.1, specifically prohibits anyone from preparing, issuing, or requesting “either in addition to or in lieu of a certificate of insurance, an opinion letter or other document or correspondence that is inconsistent with this Code section.” That law goes on to state that “No certificate of insurance shall contain references to contracts, including construction or service contracts, other than the referenced contract of insurance.”

This prohibition was clarified in the regulations subsequently issued by the Insurance Commissioner’s Office.  Those regulations prohibit the reference in an insurance certificate “to any language or contents in the construction or service contracts.” The only thing that can be referred to in the insurance certificate is “a reference or contract number from the construction or service contract for identification purposes only.” The regulations also flatly state that “Neither an insurer nor a producer shall be required to issue an opinion letter or other document in addition to or in lieu of a certificate of insurance.” Instead, “Insurers and producers may provide the certificate holder with the certificate and an actual copy of the policy, insurance binder or relevant policy provision to demonstrate contractual compliance.”

If an agent can’t refer to contracts other than contracts of insurance in an insurance certificate, then as the regulations make clear, an agent can’t refer to other contracts in an opinion letter or other document that is requested by the certificate holder or anyone else.  If the person requesting such a letter insists on it being provided, the agent should point out to that person that the above law prohibits requesting such a letter or other document, as well as providing it, and that a fine of up to $5,000 can be imposed for its violation.

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