Insurance: Insurance

C. Certificates of Insurance

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C. Certificates of Insurance. There is an illusion regarding an examination of insurance when certificates are provided by tenants to landlords. The illusion exists that the certificate in fact, is binding on the insurance company. In the first place, insurance certificates are usually issued by agents of the insurance company whose authority is at best uncertain. Secondly, until the early 1990s, certificates of insurance contained the following statement: "This certificate is issued as a matter of information only and confers no rights upon the certificate holder. This certificate does not amend, extend or alter the coverage afforded by the policies below." Thus, it is obvious that certificates might not adequately represent the insurance being provided. Indeed, the only claim available, if the certificate misstates the insurance, is against the errors and omissions policy of the issuer of the certificate which is inadequate protection because of lack of coverage and the inordinate length of time necessary to recover in a tort action.

In the early 1990s, an association called ACORD, which is a collective nonprofit organization subscribed to by most of the insurance carriers in the United States, issued certificates in form both non-binding and binding. The non-binding forms of insurance are ACORD 25 Form as evidence of liability insurance and ACORD 24 Form as evidence of property insurance. These certificates contain the disclaimer quoted above.

However, ACORD has issued certificates known as the ACORD 27 and ACORD 28. The ACORD 27 and ACORD 28 are styled as "Evidence of Insurance." They contain the following statement: "This is evidence that the insurance as identified below has been issued, is in force, and conveys all the rights and privileges afforded under the policy." The certificates provide for notice to additional interest parties of termination and notification of changes. The ACORD 27 and 28 do not contain a statement denying amendment, extension or alteration of coverage, does contain a unequivocal obligation to give notice and purports to convey all the privileges of the policy to the certificate holder. An ACORD 27 and ACORD 28 are available only for property insurance.

The benefits of the ACORD 28 certificate arise because it has added many of the items as "boilerplate" which have been requested in connection with the issuance of the ACORD 27. The form is new and many insurance agents and risk managers remain unfamiliar with the certificate.

An attorney representing a landlord in a lease transaction or a lender in a loan transaction should insist on an ACORD 28 certificate if copies of the policy are not available.

Nevertheless, it is best to obtain copies of the policy of insurance as the primary evidence of the terms and conditions of the policy. This may not be possible where coverage is provided by a blanket policy or where the interrelationships of other insurance not the subject of the lease are confidential or too complex for appropriate analysis. Under those circumstances, the ACORD 28 certificate is the only acceptable evidence of insurance. (N.B.: As of Fall 2006, the ACORD 27 and ACORD 28 certificates have been radically changed. They no longer contain the language that binds the insurance company. As a result, certain lenders such as Freddie Mac have decided that non of the available Certificates will be used in closing their transactions. The recourse available as of now is to receive a binder executed by the insurance company, receive certificates executed directly by the insurer or receive a copy of the policy. These are the only effective methods of determining that the insurance carrier has agreed to the insurance provided for the particular transaction.)

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