From the April 2012 issue of American Agent & Broker •Subscribe!

Playing COI

Online blowout puts ACORD 25 language under the microscope

If you take away all the sound and fury, it certainly seems that the wording is simple enough:

This is to certify that the policies of insurance listed below have been issued to the insured named above for the policy period indicated. Notwithstanding any requirement, term or condition of any contract or other document with respect to which this certificate may be issued or may pertain, the insurance afforded by the policies described herein is subject to all the terms, exclusions and conditions of such policies. Limits shown may have been reduced by paid claims.

Grizzled veterans among us no doubt instantly recognize the venerable wording from the ACORD Certificate of Liability Insurance (ACORD 25), or as more commonly referred to, a COI. Prominently displayed across the top center of the form, it would seem hard to overlook and even harder to misinterpret. Yet if a recent blowout discussion on LinkedIn among supposed industry experts is any indication, both actions are more than common.

Related: Read the previous Amrhein colum "Cross the Bridge."

For those of you not regularly purveying online digital discussions, permit me to define “blowout.” If you publish an article, blog or opinion on Facebook and get two “likes” and three comments—two of which are veiled advertisements for dating or drug sites that ostensibly changed the commenter’s life forever—that is not a blowout. In fact, that is what we online citizens call “normal.” But sometimes a nerve is struck, a fire is flamed, and literally dozens of feverish replies appear within moments. This is a “blowout.” Of course, even blowouts must be separated into those worthy of review, and those where half of the comments involve race-baiting, sexual slurs or political aspersions—and those are just the sports sites.

But a truly worthy blowout on an insurance site? A rare and precious thing, indeed. Yet there it was, and all about our humble COI. 

Before I risk prejudicing your opinion on that discussion, look again at the specific wording and let’s all agree on its clear language. 

The first sentence simply refers the reader to the information stated in the blocks above our quoted wording. The second reminds us a COI is not the policy but the messenger. Much like the moon has no light of its own but simply reflects the sun, a COI has absolutely no meaning or importance beyond the policies it is meant to represent. And with a finishing flourish, our disclaimer language makes clear any limits shown on the COI are simply the original limits stated on the policies themselves, and not meant to represent any balances currently available in the aggregate checking accounts.

Let us pause and consider what was just stated. The wording is simple and clear,  stating if there are questions, you are looking at the wrong piece of paper for answers. “Don’t shoot me, I’m just the messenger” has been a common plaint throughout the ages from those of us who have been in the same position as the COI, and yet attacked by those who dislike the message. Railing at a COI is akin to ripping the phone out of the wall after bad news (okay, that is dated—perhaps smashing your iPhone against the wall after that “break-up” text), setting fire to your report card after that last disastrous exam, or Voldemort ripping Malfoy when he really wanted his wand upside the head of Harry Potter.

Related: Read another Amrhein column "Beautiful Brevity."

Yet what do we see in real life? Endless seminars exist on the possible permutations and legal pitfalls of the second sentence alone. It reminds me of when our high school English teacher spent weeks on deeply examining the symbolism and allegories cleverly hidden within Robert Frost’s “Stopping by Woods on a Snowy Evening.” Years later, I read an interview with Frost where he basically said, “Well, we were out, and it was a beautiful snowy evening, and I thought I’d write a poem about it.” If I’d had the money and time, I would have tracked down my teacher and smacked her upside the head for all that wasted brain strain—to say nothing of that term paper and final exam. These days I find comfort in knowing incidents like that are exactly what Paul Simon recalled when he sang in “Kodachrome” that after high school, “It’s a wonder I can think at all.”  

Given the common focus on the second sentence, you could be forgiven for assuming our blowout was along a similar road. You’d be wrong. 

It was the third sentence.

It all started innocently enough, with someone asking what limits did other folks show when, for example, an insured had $10 million in limits but the certificate requester only asked for verification of $2 million. That would seem a relatively easy answer. Summarizing our discussion of the clear language of the disclaimer as a whole, we find: 

  1. The COI lists specific policies for specific insureds
  2. Those policies say whatever they say, and the COI is simply a reflection
  3. Limits are those on the policies, not anything currently remaining after paid claims. 

Ergo, if the limit on the listed policy is $10 million, the COI states the limits are $10 million. 

Another set of question arose about limits that may be available on other policies, such as excess layers or umbrellas. Again, using our three-step analysis of the disclaimer, if those policies are not listed on the COI, there would seem no need to list their applicable limits. If you do list the policies on the COI, then the limits must be shown in full.

So far, so good. But now is where the various “English teachers” wade in. Comments flowed about insureds wanting their limits kept secret, so only show what was required, not what was actually on the listed policies. It would seem clear the COI language does not give them that option. Yet in response to that suggestion, lawyers and expert witnesses faced off about the risks of discovery of undisclosed coverages on a suit for higher damages than the COI revealed. Agents waded in about possible wording that could be added to the COI in the remarks section or (gasp!) in the policy endorsements reflecting that no matter what the actual policy limits, only those required in the contract between the insured and the certificate holder would apply. 

That sparked an avalanche of comments on the dangers of trying to conform policy language and endorsements to the often vague and broad hold-harmless and indemnification agreements contained in contracts. A few responses accurately pointed out that agents and insurance carriers are not party to a contract between an insured and another party. The insured is free to sign any contract she wants, but neither the agent nor carrier can guarantee, no matter what is agreed to, that insurance will always cover claims. Implying such a guarantee, and thereby stepping from the sidelines directly into the crossfire, is the path to the dark side: bad faith; E&O or other unintended coverage nightmares. 

Related: Read the article by Chris Amrhein "Rain Blame."

There were even a few who argued that it’s unethical to state limits on certificates they already knew have been reduced by paid claims. More unethical than ignoring specific disclaimer language on a copyrighted form? And once you are willing to ignore some of the COI, where do you stop? We already know of agents who blithely change COI wording in the cancellation clause or add coverage summaries or requested certificate holder language to the remarks section, not only casting aside any appearance that the COI is not a key coverage document but removing from themselves any protection afforded by ACORD’s extensive disclaimers. 

When reviewing the entire discussion online, I couldn’t shake Shakespeare’s famous line: “Full of sound and fury, signifying nothing.” It’s not that these discussions aren’t interesting. After all, I followed it. But it was interesting in the same sense as sitting all the way through a bad movie: You keep hoping it will get better, but afterward you can’t believe the waste. What if the obvious firepower of all those talented commenters had been spent on one of the truly complex and evolving coverage issues out there? What if my English teacher had picked a more appropriate poem? If we can’t resist turning even this clear language molehill into a mountain of contention, how can we complain when insureds and certificate requesters keep insisting a COI is far more than a mere reflection, but rather a light source unto itself? And once the fight is joined, how can our designated societal referees—the courts—  not get dragged in? If we decry their resulting opinions, they could fairly reply, “Hey, you started this.” 

When it comes to limits and the COI, anything beyond “Here is the identity of the policy, here are the limits stated on that policy. Move along, nothing to see here” continues to give credibility and visibility to vaporware. 

When coverage issues are gray and/or complex, admit it. But when they are clear and clean, stick to your guns. As Bruce Springsteen sang in “Brilliant Disguise”: “God have mercy on the man who doubts what he’s sure of.” 

On this one, I’m with the Boss.

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