Last week, Utah became the first state to enact legislation in 2011 that addresses the marketplace problems associated with the use of certificates of insurance.

Certificates offer convenience and simplicity to their recipients, but they are different than insurance policies. They provide a snapshot of the coverage in place at the time of their issuance and do not convey rights or alter the insurance policies they describe. Problems have arisen because some requesters of certificates have attempted to alter the purpose, effect and status of certificates. For example, some parties (1) request the issuance of certificates that purport to expand insurance coverage beyond the terms of the underlying policies, (2) demand the inclusion of unreasonable terms and conditions and (3) otherwise attempt to force insurance agents to issue certificates that are deceptive and misleading.

The law signed by Utah Governor Gary Herbert last Wednesday is nearly identical to a legislative proposal developed by IIABA and is designed to eliminate many of the certificate-related challenges facing independent insurance agents. Among other provisions, the new Utah law does the following:

• Affirms that certificates of insurance are not insurance policies and cannot be used to amend coverage or confer rights that are not contained in an insurance policy;

• Prohibits any person from issuing or demanding the issuance of a certificate that includes false or misleading information;

• Requires standard certificate forms to be filed and approved by the insurance department before they may be used; and

• Clarifies that a certificate holder only has a right to a notice of cancellation and similar disclosures if provided for in the insurance policy and that such rights may not be altered by a certificate.

Legislation based on the IIABA model proposal was first enacted by Louisiana in 2010, and Utah is not the only state to initiate action on certificate issues this year. Similar legislation has been sent to the governor in North Dakota, adopted by both legislative chambers in Georgia and approved by at least one chamber in several other states. The Utah and North Dakota bills successfully made their way through the entire legislative process without receiving a single dissenting vote at any stage of consideration.

Addressing certificate-related problems is a significant priority for IIABA and one that the association is addressing on a number of fronts. The Big “I” will continue to pursue its legislative package and other measures that help prevent the misuse of certificates in the marketplace and ensure that they are used only for their intended purposes.

Wes Bissett (wes.bissett@iiaba.net) is Big “I” senior counsel, government affairs.