PIAA Works to Stop Certificate of Insurance Abuse


March 5, 2015

PIAA is proactively pursuing legislation to provide clarity and relief to agents and businesses dealing with unreasonable certificate of insurance requests and demands.

We are working with Senators Kevin Bacon (R-Minerva Park), Bill Beagle (R-Tipp City) and Rep.Barbara Sears (R-Sylvania) to introduce legislation to make it expressly illegal to demand or issue a false or misleading certificate of insurance.

It is common for non-insurance entity third parties to burden agents with requests to issue certificates or sign agent affidavits or compliance checklists that conflict with an underlying policy’s terms. These requests happen for various reasons and put you in an ethical dilemma of having to decide whether to comply with the request or risk losing the business. When an altered certificate is issued, it creates situations in which proper insurance coverage is not in place, putting both workers and the general public at risk.

In 2009, the Ohio Department of Insurance issued Bulletin 2009-08 to help address some of the problems in the marketplace, but persisting issues warrant a statutory solution to stop fraud.

Elements of PIAA’s legislative solution

The draft PIAA has created is based on a slightly modified version of the National Conference of Insurance Legislators Model bill. PIAA’s draft legislation will:

  • Prohibit any person from issuing or demanding the issuance of a certificate that includes false or misleading information, thus requiring a certificate to be a true and accurate representation of the policy
  • Affirm that certificates are not insurance policies and cannot be used to alter, revise, or modify an insurance policy
  • Authorize the insurance director to enforce the act with civil penalties up to $1,000 per violation of the law

Why now?
This issue has been a longstanding problem for agents. PIAA attempted a legislative fix in 2012 with SB 346, but that legislation was unsuccessful. Since then, the issue continues to present challenges to agents, as evidenced by continual agent complaints. In addition, the results in PIAA’s recent advocacy survey identify this issue as the top legislative concern for our membership.

The passage of this legislation will make it expressly clear that agents and businesses who violate the law will be subject to penalties, fines and possible actions taken against their insurance license, included losing their license altogether.

We are told insurance certificate fraud is commonplace. The victims of this fraudulent transfer of risk are the injured parties who find that work was being done on the basis of a faulty certificate and that no insurance actually exists to compensate them for their injuries and loss. It is one of the leading reasons for E&O claims against agents.

Will this work?

To date, 24 states have passed similar legislation that we are proposing. Coupled with the passage of legislation and template letter provided by the state independent agents association, many states have been able to substantially reduce the number of complaints associated with certificates of insurance requests.

What’s next?
The legislation is being vetted with the Ohio Insurance Institute, insurance carriers, construction and general contractors associations, banking and lending community. We expect it to be introduced into the legislature this week. Contact Jeff Smith, PIAA’s director of government affairs, with questions or comments on this initiative.