Since April 2015, Massachusetts has had a statute, Massachusetts General Laws Chapter 175L (“certificate law”) codifying the rules for certificates of insurance (sometimes, “certificates”). While producers and carriers may be up on the law through their continuing education, Agency Checklists still thought our readers might like a quick refresher with ten points about what the certificate law requires or prohibits.
Point one: A certificate need not say “certificate of insurance”
The certificate law defines a certificate as:
A document or instrument, regardless of how titled or described, that is prepared or issued by an insurer or insurance producer as evidence of property or casualty insurance coverage.
There is no specific title or magic description that makes a document a certificate of insurance. The test is whether an insurance producer or insurance company issued the document and it can be reasonably construed as evidencing coverage some form of property and casualty insurance.
Point two: While a certificate can be any document there are exceptions.
The certificate law exempts from the definition of a certificate any “policy of insurance, insurance binder, policy endorsement or automobile insurance identification or information card.” Notwithstanding this exclusion, the classic automobile insurance identification card in Massachusetts, the registration certificate, would still be a certificate of insurance as the result of another statute specifically relating to automobile registrations and insurance certifications.
Point three: A certificate may not “amend, extend or alter the coverage afforded by the policy it evidences.”
The purpose of this condition in the certificate law is to make the actual underlying policy the certificate evidences the primary document. Almost all insurance policies have an integration clause which states that no other document other than the policy states the obligations of the parties. However, courts have found that certificates issued to third parties created liability for the insurer besides what the policy alone provided. This provision neutralizes the certificate as a source of independent coverage or policy ambiguity.
Point four: A certificate cannot create any new or additional rights outside the policy it references.
Just as under the certificate law, a certificate cannot amend extend or alter the underlying policies coverage, a certificate cannot create any rights or obligations that do not already exist within the underlying policy reference by the certificate. Between this provision in the prior provision the authors of the legislation indulged in legislative overkill to ensure there could be no legal interpretation that a certificate had any independent significance other than evidencing property casualty coverage as specified in an underlying policy exists.
Point five: A certificate cannot be interpreted for compliance with an insurance requirement in another contract.
The certificate law states that a certificate “may not warrant that the policy of insurance referenced in the certificate compl[ies] with the insurance or indemnification requirements of a contract.” This provision prohibits a certificate from being used to create legal liability for a carrier through any statements in a certificate that warrant or represent that the certificate is issued in compliance with another contract’s insurance conditions. The certificate law also specifically states that because a certificate includes “a contract number or description within a certificate of insurance” of a contract cannot be interpreted as a warranty or representation that the underlying insurance referenced in the certificate fulfills any third-party’s contractual requirements.
Point six: False or misleading information given or asked for in a certificate can lead to a fine, cease and desist or investigation by the commissioner of insurance.
The certificate law bars anyone from knowingly preparing, issuing, requesting, or requiring any false or misleading information in the certificate. However, under the certificate law the commissioner of insurance seems to have at least concurrent jurisdiction, if not exclusive jurisdiction with the courts to enforce the certificate law. The certificate law does not limit the commissioner’s jurisdiction to just insurers and insurance producers. The commissioner enforces the certificate law and has the authority to issue orders to cease and desist and impose fines of up to $500 per violation against any person who violates the statute. A person subject to the commissioner’s authority is defined as: “any individual, partnership, corporation, association or other legal entity, including any government, governmental subdivision or agency.” The commissioner has authority over any person who is involved with preparing, issuing, requesting, or requiring anything in a certificate whether licensed by the division of insurance or not.
Point seven: A certificate referencing affirmatively or negatively coverage outside the policy violates the certificate law as does making such a request.
Likewise, the law prohibits anyone from preparing, issuing, requesting or requiring a certificate that purports to affirmatively or negatively reference insurance outside the coverage provided by the underlying policy. This provision of the certificate for like the prior provision is subject to the broad jurisdiction of the commissioner to enforce the certificate law.
Point eight: A certificate cannot create a right for the holder to receive notices from the insurer issuing the underlying policy.
This provision of the certificate law continues the laws focus on the underlying policy and under this law the holder of the certificate cannot rely on the certificate stating that the insurer on the underlying policy will send the certificate holder a cancellation notice, non-renewal or material change notice even if such as stated on the certificate. The certificate law is clear that any such statement on this certificate creates no right to receive notice of cancellation, non-renewal or material changes to a policy unless the terms of the policy or a policy endorsement provides that such notices will be given. However, an independent document from the carrier undertaking to send such notices would create an independent legal right outside of the certificate law that would seem to protect the certificate holder no matter what the policy said.
Point nine: It does not matter where the policyholder, producer or requester is located.
The certificate law applies to all certificates of insurance issued in connection with property, operations or risks located in the commonwealth regardless of where the policyholder, insurer, insurance producer or person requesting or requiring the issuance of a certificate of insurance is located. If the property and casualty risk is located in Massachusetts, the certificate law requires that the certificate of insurance comply with Massachusetts law.
Point ten: The commissioner of insurance has the power to declare a certificate “null and void”
Before the passage of the certificate law, a court was the only place a certificate of insurance could be litigated. Under the certificate law, the commissioner of insurance has the power to determine if a certificate of insurance “or any other document or correspondence prepared, issued, requested or required” is in violation of the certificate law. If the commissioner so determines, then the certificate of insurance or other document is “null and void.”
No Massachusetts court has interpreted the certificate law
The certificate law tries to make statutorily clear that insurance certificates will not and cannot modify the terms or conditions of the underlying insurance policies they evidence. There have not yet been any court decisions in Massachusetts interpreting the Act. Whether Chapter 175L will accomplish the unstated goal of statutorily reversing court decisions finding that insurance certificates create liability for insurance companies and insurance producers outside of the explicit terms of the underlying insurance remains to be seen.
However, the first court to address a case involving an insurance certificate must decide whether the statutory provisions giving the commissioner of insurance the power to declare any certificate “null and void” has created primary jurisdiction over certificates with the commissioner. If it did, there would be no legal cases involving certificates since they would all be subject to administrative proceedings before the division of insurance.
A copy of the Chapter 175L as passed can be found here: Chapter 175L certificate of insurance.
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