Maryland Certificates: What the law says

Why the new law? What to expect?

HB 982/SB 656 was enacted by the General Assembly in the 2011 session. Addressing the rampant abuse of certificates of insurance was a priority for IA&B, and this bill had our full support. In spite of the fact that some language was taken out, this piece of legislation should prove a tremendous improvement in enabling producers to push back inappropriate certificate requests. Below is a summary of the new law.
Effective date: Oct. 1, 2011

What a certificate IS:

  • A certificate of insurance is a document that is prepared as evidence of Property or Casualty coverage.

What a certificate IS NOT:

  • A certificate is not a policy or a binder,
  • A certificate does not amend, alter or extend coverage
  • A certificate does not confer any additional coverage to the certificate holder
  • The right and conditions to notice of cancellation are governed by the policy and cannot be changed by the certificate.

The new law:

  • formalizes and clarifies the purpose of an insurance certificate, including the fact that they do not amend, alter or extend policy coverage;
  • expands on the violations, and
  • broadens the reach of the Maryland Insurance Administration for enforcement;
The new language provides significant improvements for insurance agencies.
  • It is now a violation for ANY PERSON to “require an insurer or insurance producer to prepare or issue, or a policyholder to provide, a certificate” or any substitute document “that contains false or misleading information.”
  • The new law enables the MIA to enforce violations against entities that do not normally fall under its jurisdiction, those entities where most inappropriate requests have originated over the years (government entities, counties, municipalities, large corporations, et al).
Access the law (Insurance Article, section 19-116)

What did not pass:

  • The requirement to file certificate forms with the MIA (however, a summer study has been commissioned, and IA&B will provide input on this item). IA&B’s stance is that the requirement to file certificates would lead to a more widespread use of standard forms (mostly ACORD), making the process simpler and more consistent.
  • The requirement that a certificate contain language providing that certificates are for information only and confer no rights to the certificate holder. However, the bill passed with abundant language indicating that a certificate could not amend, alter, or extend coverage that was not included in the policy.
  • Lenders managed to insert a carve-out for their industry.

What to do if you run into an inappropriate certificate request

The regulator should be made aware of abuses in the marketplace. Producers are encouraged to file a complaint with the Maryland Insurance Administration (MIA), and refer to Insurance Article, section 19-116.

Toolbox

This document is not a legal opinion and should not be relied upon as such. The intent of this document is to provide a general background regarding the topic or topics discussed, not to provide legal advice. Producers and agencies should consult an attorney regarding specific situations and specific questions with respect to the topic or topics covered in this document. Neither the Insurance Agents & Brokers nor any of its employees shall be responsible for any errors or omissions regarding any statements made in this document, nor any errors or omissions regarding any statutes, regulations, court rules, and/or any other government documents cited in this document.
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