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A03107 Summary:

BILL NOA03107D
 
SAME ASSAME AS S05804
 
SPONSORMorelle (MS)
 
COSPNSRHevesi, Lupardo, Weprin, Perry, Jaffee, Schimminger, Lavine
 
MLTSPNSRBraunstein, McDonald, Montesano, Thiele
 
Add Art 5 SS501 - 505, Ins L
 
Relates to the issuance of certificates of insurance and requires the issuance of a certificate of insurance as a summary or evidence of property or casualty insurance.
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A03107 Actions:

BILL NOA03107D
 
01/23/2013referred to insurance
03/04/2013amend and recommit to insurance
03/04/2013print number 3107a
05/10/2013amend and recommit to insurance
05/10/2013print number 3107b
06/07/2013amend and recommit to insurance
06/07/2013print number 3107c
06/12/2013reported referred to codes
06/14/2013amend and recommit to codes
06/14/2013print number 3107d
06/17/2013reported referred to rules
06/18/2013reported
06/18/2013rules report cal.409
06/18/2013ordered to third reading rules cal.409
06/18/2013passed assembly
06/18/2013delivered to senate
06/19/2013REFERRED TO RULES
06/20/2013SUBSTITUTED FOR S5804
06/20/20133RD READING CAL.1511
06/20/2013PASSED SENATE
06/20/2013RETURNED TO ASSEMBLY
12/06/2013delivered to governor
12/18/2013vetoed memo.257
12/18/2013tabled
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A03107 Memo:

NEW YORK STATE ASSEMBLY
MEMORANDUM IN SUPPORT OF LEGISLATION
submitted in accordance with Assembly Rule III, Sec 1(f)
 
BILL NUMBER: A3107D
 
SPONSOR: Morelle (MS)
  TITLE OF BILL: An act to amend the insurance law, in relation to certificates of insurance   PURPOSE: To establish standards for the proper issuance of certif- icates of insurance and to authorize the department of financial services and other entities to impose penalties against any person who violates the provisions of this article.   SUMMARY OF PROVISIONS: Section 1 adds a new article five to the insurance law, which sets forth specific standards for the issuance of certificates of insurance. Section 501 provides for definitions of the terms "certificate", "certificate of insurance", 'certificate holder", "insurance producer", "insurer", "person", and "policyholder." Section 502 sets forth prohibited practices, including, altering or modifying a certificate of insurance form, knowingly requesting the issuance of a certificate of insurance that contains false or misleading information, issuing a certificate of insurance that alters the terms or coverage provided by the insurance policy, issuing an opinion letter or similar document that is inconsistent with this section. However, an accompanying addendum, with clarifying information is permissible. Section 503 provides for the applicability of the provisions of this section. Section 504 provides for enforcement powers of the superintendent, the NYS inspector general, and other appropriate entities. Section 505 provides for rules and regulations to be adopted by the superintendent. Section 2 of the bill provides for a 90 day effective date.   EXISTING LAW: Under current law, an insurance producer may not add terms or clauses to a certificate of insurance which alter, expand or otherwise modify the terms of the actual policy, unless authorized by the insurer which has filed an appropriate endorsement with the Depart- ment of Financial Services. The department may take disciplinary actions against producers that engage in this practice. However, those parties that make the request for a certificate that alters the terms of the policy are not regulated by the Department of Financial. Services and the department has no authority to prohibit them from demanding improper certificates of insurance. Additionally, existing law does not define certificates of insurance or sets standards for forms.   JUSTIFICATION: Insurance producers are often asked by their commer- cial insurance clients to provide certificates of insurance to various third parties, A certificate of insurance is commonly used in business transactions as proof that a policy of insurance is in effect. It is a simple document . that merely summarizes the essential terms, condi- tions, and duration of the contract of insurance that is in effect between the insured and the insurer. Usually, the request for a certif- icate is made by a party the insured has contracted with to provide services, including city, state, and municipal agencies, public authori- ties, as well as private contractors. A problem has existed for many years where various government agencies have required, as a condition of doing business, that an insured supply evidence of insurance on preprinted forms supplied by the agency, These forms often times alter, expand or modify the terms of the subject poli- cy. In other cases, government agencies or private contractors may demand that terms be added to the standard ACORD certificate of insur- ance form which do not appear in the insurance policy.For example, requests are often made for the certificate to include "hold harmless" agreements or other clauses that alter the language of the policy, as well as statements that the wording of the certificate will control in the event of any inconsistency or conflict between the certificate and the policy. An insurance producer that is asked to provide these types of altered certificates may not legally do. so. The Department of Financial Services has made it clear that an insurance producer may not add terms or clauses to a certificate of insurance which alter, expand or other- wise modify the terms of the actual policy unless authorized by the insurer which has filed an appropriate endorsement with the Superinten- dent of Financial Services. The department may seek disciplinary meas- ures against producers who do this. Insurance producers are being placed in an untenable position. If they do not comply with the request to issue an improper certificate, their insurance client will not be allowed to perform work for the party asking for the certificate. Unfortunately, an insurance producer that complies with the law and refuses to issue an improper. certificate will often lose the client, who will find another insurance producer willing to ignore the law and issue the improper certificate. The department has recognized this problem over the years and has.issued numerous opinions and two circular letters on this topic (Circular Letter 8 (1995) and Circular Letter 15 (199))). Circular letter 15 was also issued to city, state, and municipal agencies and other public authorizes and corporate, as well as to producers. In the circular letter, the department acknowledges that these government agencies were making requests for improper certificates and advised insurance producer that they may not provide them. Despite the department's efforts, government agencies continue to insist upon certificates of insurance that do not merely act as evidence of insurance, but seek to modify the terms and conditions of coverage. This bill will remedy this problem by making it a violation of law for any person to request the issuance of a certificate of insurance that contains any false or misleading information.   LEGISLATIVE HISTORY: S.4425-B of 2011-12   FISCAL IMPLICATIONS: None.   EFFECTIVE DATE: 90 days after it shall have become a law.
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A03107 Text:



 
                STATE OF NEW YORK
        ________________________________________________________________________
 
                                         3107--D
 
                               2013-2014 Regular Sessions
 
                   IN ASSEMBLY
 
                                    January 23, 2013
                                       ___________
 
        Introduced  by M. of A. MORELLE, HEVESI, LUPARDO, WEPRIN, PERRY, JAFFEE,
          SCHIMMINGER, LAVINE -- Multi-Sponsored by  --  M.  of  A.  BRAUNSTEIN,
          McDONALD, MONTESANO, THIELE -- read once and referred to the Committee
          on  Insurance -- committee discharged, bill amended, ordered reprinted
          as amended and recommitted to said committee --  again  reported  from

          said  committee  with  amendments,  ordered  reprinted  as amended and
          recommitted to said committee -- again reported  from  said  committee
          with  amendments, ordered reprinted as amended and recommitted to said
          committee -- reported and  referred  to  the  Committee  on  Codes  --
          committee  discharged,  bill amended, ordered reprinted as amended and
          recommitted to said committee
 
        AN ACT to amend the insurance law, in relation to certificates of insur-
          ance
 
          The People of the State of New York, represented in Senate and  Assem-
        bly, do enact as follows:
 
     1    Section  1.  The insurance law is amended by adding a new article 5 to
     2  read as follows:
     3                                  ARTICLE 5
     4                          CERTIFICATES OF INSURANCE
     5  Section 501. Definitions.

     6          502. Prohibitions.
     7          503. Applicability.
     8          504. Enforcement.
     9          505. Rules and regulations.
    10    § 501. Definitions. For purposes of this section:
    11    (a) "Certificate" or "certificate of insurance" means any document  or
    12  instrument,  no  matter  how  titled  or described, which is prepared or
    13  issued by an insurer or insurance producer as evidence  of  property  or
    14  casualty insurance coverage. "Certificate" or "certificate of insurance"
    15  shall  not  include  a policy of insurance or insurance binder, and does
    16  not amend, extend or alter the coverage provided by the policy of insur-
 
         EXPLANATION--Matter in italics (underscored) is new; matter in brackets

                              [ ] is old law to be omitted.
                                                                   LBD06628-18-3

        A. 3107--D                          2
 
     1  ance to which the certificate makes reference, and is subject to all the
     2  terms, exclusions and conditions of  such  policy.    A  certificate  of
     3  insurance shall not confer to any person new or additional rights beyond
     4  what the referenced policy of insurance expressly provides.
     5    (b)  "Certificate holder" means any person, other than a policyholder,
     6  that is identified on the certificate as a certificate holder.
     7    (c) "Insurance producer" has the meaning ascribed to it by  subsection
     8  (k) of section two thousand one hundred one of this chapter.

     9    (d)  "Insurer"  means any person "doing an insurance business" as such
    10  phrase is defined in section one thousand one hundred one of this  chap-
    11  ter.
    12    (e)  "Person"  means any individual, partnership, corporation, associ-
    13  ation, or other legal entity, but shall  not  include  any  governmental
    14  entity, as that term is defined in this section.
    15    (f)  "Governmental entity" means any public entity as defined in para-
    16  graph fifty-one of subsection (a) of section one hundred seven  of  this
    17  chapter,  any  state  authority as defined in subdivision one of section
    18  two of the public authorities law, any local  authority  as  defined  in
    19  subdivision  two  of  section two of the public authorities law, and any

    20  interstate or international authority as defined in subdivision three of
    21  section two of the public authorities law.
    22    (g) "Policyholder" means a person who has contracted with  a  property
    23  or casualty insurer for insurance coverage.
    24    §  502.  Prohibitions.  (a)  No  person  or  governmental entity shall
    25  prepare, issue, request, or require the issuance  of  a  certificate  if
    26  such  person or governmental entity knows that such certificate does not
    27  comply with the following provisions:
    28    (1) A standard certificate of insurance form promulgated  and  author-
    29  ized  for use by the Association for Cooperative Operations Research and
    30  Development (ACORD) or the Insurance Services Office (ISO);

    31    (2) A form promulgated by the insurance company that has  underwritten
    32  the policy referenced in the certificate of insurance; or
    33    (3)  A form prepared, issued, or requested as evidence of insurance in
    34  connection with a commercial lending transaction in which the underlying
    35  property serves as the primary collateral securing the borrower's repay-
    36  ment of the loan, including, but not limited to a  form  promulgated  by
    37  the Mortgage Bankers Association (MBA).
    38    (b)  No person or governmental entity shall alter, modify, request, or
    39  require the alteration of a certificate  of  insurance  form  when  such
    40  person  or governmental entity knows that such alteration, modification,
    41  request or requirement is in violation of this article.

    42    (c) No person or governmental entity shall request or require  that  a
    43  certificate  of  insurance form contain additional terms, conditions, or
    44  language of any kind not found in the  insurance  policy  to  which  the
    45  certificate  makes  reference  or  to an endorsement to such policy when
    46  such person or governmental entity knows such request or requirement  is
    47  in violation of this article.
    48    (d)  No  person or governmental entity shall request or require either
    49  in addition to or in lieu of a  certificate  of  insurance,  an  opinion
    50  letter, warranty, statement, supplemental certificate or any other docu-
    51  ment  or correspondence that such person or governmental entity knows to

    52  be inconsistent with the prohibitions of  this  section.    However,  an
    53  insurer  or  insurance  producer  may  prepare or issue an addendum to a
    54  certificate that clarifies and explains the coverage provided by a poli-
    55  cy of insurance and otherwise complies with  the  requirements  of  this

        A. 3107--D                          3
 
     1  section,  provided  such  authority  is  granted  to the producer by the
     2  insurer.
     3    (e)  No  person or governmental entity shall request or require that a
     4  certificate of insurance that such person or governmental  entity  knows
     5  to  contain references to a contract other than the insurance policy, or
     6  warrant that the insurance policies referenced in the certificate comply

     7  with the requirements  of  a  particular  contract  provided  however  a
     8  certificate  may  include  a  contract title or description for the sole
     9  purpose of identifying the project for which the certificate was issued,
    10  but such inclusion shall not  be  interpreted  as  warranting  that  the
    11  insurance  policies  referenced  in  the  certificate  comply  with  the
    12  requirements of such contract.
    13    (f) No person or governmental entity shall request or require, prepare
    14  or issue a certificate of insurance that  such  person  or  governmental
    15  entity  knows:    (i)  does  not  accurately state the terms of coverage
    16  provided by the policy or policies of insurance to which the certificate

    17  makes reference; (ii) purports to alter, amend, extend, or  misrepresent
    18  the terms of coverage to which the certificate makes reference; or (iii)
    19  purports  to  confer  to any person new or additional rights beyond what
    20  the referenced policy of insurance expressly provides.
    21    § 503. Applicability. The provisions of this section  shall  apply  to
    22  all  certificate  holders, policyholders, insurers, insurance producers,
    23  or any other person and to certificate  of  insurance  forms  issued  as
    24  evidence  of  insurance  coverages  on  property,  operations,  or risks
    25  located in this state, regardless of where the certificate holder, poli-
    26  cyholder, insurer, or insurance producer is located.

    27    § 504. Enforcement. (a) The superintendent shall have the power  under
    28  section  four hundred three of the financial services law to examine and
    29  investigate the activities of any person that the superintendent reason-
    30  ably believes has been or is engaged in an act or practice prohibited by
    31  this article. The superintendent shall have the  power  to  enforce  the
    32  provisions  of  this section and impose any authorized penalty or remedy
    33  as provided under section four hundred eight of the  financial  services
    34  law against any person who violates this article.
    35    (b)  The  office  of  the state inspector general shall have the power
    36  pursuant to section fifty-three of the executive law to investigate  any

    37  governmental  entity  that  is considered a covered agency under section
    38  fifty-one of the executive law that has been or is engaged in an act  or
    39  practice  prohibited  by  this  article.  If  a  governmental entity not
    40  considered a covered agency under section fifty-one of the executive law
    41  has been or is engaged in an act or practice prohibited by this article,
    42  that entity's inspector general, other compliance or  internal  investi-
    43  gative unit or other official or entity with proper authority shall have
    44  the power to investigate such entity.
    45    §  505.  Rules  and regulations. The superintendent may adopt rules or
    46  regulations as  he  or  she  considers  appropriate  to  carry  out  the
    47  provisions of this article.

    48    §  2.  This  act shall take effect on the ninetieth day after it shall
    49  have become a law.
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