In light of the upswing in E&O cases involving agents and certificates of insurance (COIs), an agency is doing all it can to take care of COI requirements.

But no one is perfect.

Q: " I have two questions:

• In one instance, we didn’t show coverage on the COI because the customer cannot get the coverage. If we omit a coverage required by the contract, do we have an obligation to tell the requestor of the certificate that the coverage isn't there? Do we need to call this to the COI holder's attention?
• When we discover we put something incorrect on the COI, can we fix that by sending a corrected COI?"

A: “If the contract calls for a coverage that the insured doesn’t have and the agent can‘t get, I don’t believe the agent has any obligation to make that clear on the certificate. The certificate shows what they do have. But I think the agent should notify the insured that a contractually required coverage isn’t provided. That fact likely puts the insured in breach of contract and would need to be negotiated out of the contract.

Regarding your second question: I think if a certificate has incorrect information, there’s nothing wrong. As a matter of good faith and in compliance with laws or regulations prohibiting misrepresentation, you should follow up with a corrected certificate.

Keep in mind the agent's standard of care varies by state and is very fact-specific, so these generalizations depend upon that. One potential problem occurs when the insured asks the agent to review contract requirements to determine if the insurance program is in compliance. This is a task that the party which drafted the contract and insurance requirements should perform, because the requirements are not always clear, to say the least.

I know a consultant who is involved in an eight-figure claim against an agent involving additional insured coverage requirements. These are often huge claims, far greater than the E&O policy limits of most agencies.”

Bill Wilson is director of the Big “I” Virtual University.

This question was originally submitted by an agent through the VU’s Ask an Expert Service. Answers to other coverage questions are available on the VU website. If you need help accessing the website, email logon@iiaba.net to request login information.