Outlined its views in a new regulatory bulletin
The Massachusetts Division of Insurance issued a new bulletin today on the alleged abuses regarding Certificate of Insurances in order to highlight their purpose and correct use. In the bulletin, the Division of Insurance states that it “…has been informed, however, that some insurance companies and insurance producers are being asked to provide certificates of insurance that purport to amend, extend, or otherwise alter the terms on insurance provided by the underlying policy.” The Division goes on to state that the purpose of their bulletin is “…to advise insurers and insurance producers that certificates of insurance are not the proper method by which to amend a policy, that amending such certificates of insurance may create errors and omissions exposure, and that this activity may violate the Massachusetts insurance laws.” Certificates of insurance are summaries of insurance policies, including liability limits and are used to provide that information to insureds or third parties as proof of coverage rather than sending the actual policy.
As the Division makes clear in its bulletin, Certificates of Insurance should never be confused with actual policies of insurance, and cannot be used to amend, extend or alter any insurance coverage of the underlying policy. MG.L. c. 175 §§2B and 192 require that all insurance policy forms, including riders, endorsements and applications designed to accompany a policy be filed with the Division of Insurance. As such, the Division warns, “When an insurer or insurance producer executes a certificate of insurance that attempts to do more than merely offer a synopsis or summary of the policy, the insurer or producer risks the creation of obligations that are not payable by the underlying policy.” An action such as this would be a violation of Massachusetts insurance laws, in particular, M.G.L. c. 175 §181 and M.G.L. c.176D §3(1)(a) which prohibit the misrepresentation of the terms or benefits of an insurance policy. The Division of Insurance also believes that changing a certification of insurance in the ways described above may also be a violation of M.G.L. c.176D §3(9)(a) which states that misrepresenting the “pertinent facts or insurance policy provisions relating to coverages at issue” may be considered an unfair claim settlement practice. Finally, the Division states that “…should the additional terms and conditions contained in the certificate of insurance be in conflict with or otherwise alter, the policy forms, riders, endorsements or applications the insurer has filed with the Division, the insurer and/or insurance producer may have violated M.G.L. c. 175 §2B by issuing, delivering or otherwise using a policy form that has not been filed with the Division.”
Note that the prohibition applies not only to certificates of insurance, but to other documents as well including a formal opinion or any other document signed by an insurer or an insurance producer. As such, the Division cautions that anyone thinking of amending, extending or otherwise modifying a certificate of insurance know that such actions could carry heavy consequences and result in a violation of multiple insurance statutes.
If you have more questions regarding this legal issue or any other issue regarding your insurance agency, please don’t hesitate to contact us or leave a comment below.