Beyond the ACORD 25 form

Beyond the ACORD 25 form

This month we launched our improved document parsing. We have been offering parsing of standard ACORD 25 forms for a long time, but it's important to do much more than that to do certificate tracking properly.

A little background

ACORD 25 Certificate of Liability Insurance forms are the most typical format for providing proof of insurance for a business. In an ideal world, every insurance policy would be concise, well organized and easily understood by all parties. In the real world, insurance is a complex topic that very few people understand.

This is where the ACORD 25 comes in. it does a great job of compressing complex insurance policies into hard numbers and highlights the specific types of insurance so risk managers, insurance professionals, and administrators can quickly determine whether a given business has the right types of insurance, and in appropriate amounts.

"A certificate of insurance is only good on the day it is received".

For all the convenience a certificate of insurance offers, it is only a part of the equation, and by itself, it doesn't prove anything. In fact there is a common saying in the insurance business that "A certificate of insurance is only good on the day it is received". The reason is, nothing prevents a business owner from immediately cancelling their insurance after providing you their "proof of insurance".

This may be a breach of your contract, but suing a business that doesn't have insurance in the event they cause harm is unlikely to yield much benefit. After all, if they could afford to cover your losses out of pocket they probably wouldn't be skimping on paying for insurance.

The description of operations

Every ACORD 25 prominently begins with the bolded, all-caps statement:

"THIS CERTIFICATE IS ISSUED AS A MATTER OF INFORMATION ONLY AND CONFERS NO RIGHTS UPON THE CERTIFICATE HOLDER. THIS CERTIFICATE DOES NOT AFFIRMATIVELY OR NEGATIVELY AMEND, EXTEND OR ALTER THE COVERAGE AFFORDED BY THE POLICIES BELOW. THIS CERTIFICATE OF INSURANCE DOES NOT CONSTITUTE A CONTRACT BETWEEN THE ISSUING INSURER(S), AUTHORIZED REPRESENTATIVE OR PRODUCER, AND THE CERTIFICATE HOLDER."

There has been much debate as to whether certificates of insurance hold any value whatsoever due to these caveats. However that hasn't stopped the common practice of stating policy details in the description of operations section of the certificate. In some cases these descriptions at least strongly imply coverage exists, or give the impression cancellation notice will be delivered, and courts have sided with the certificate holder (recipient). The following quote is excerpted from Big I's Certificate of Insurance Court Cases article:

"where there is an implication that the certificate might be a part of the policy or controlling thereof, several courts have ruled in favor of the certificate holder"

Since a certificate asserts that it is not a contract and confers no rights, typical compliance tracking also involves collecting endorsements.

Endorsements

An endorsement is an excerpt or addition to an insurance policy that can influence the rights of the certificate holder. It's best practice for multiple endorsements to be included with each certificate of insurance, which is why it's important to have more than just the one-page ACORD form. A typical certificate including its endorsements may be anywhere from 5 to 20 pages long.

There are more types of endorsements than we can name, each type of endorsement will give most of the same rights, but in slightly different ways. This makes it much harder to be sure what rights you have. The safest option would be to have a lawyer and insurance agent pore over each endorsement (or better yet the entire policy) to ensure you have all of the coverage you require. Unfortunately, doing this is prohibitively expensive, particularly when your business is attempting to keep track of hundreds or even thousands of insurance policies.

The new changes

For a long time Assured Certificates only tracked the ACORD 25 and the information it provides. We were able to track endorsements, but we relied on insurance brokers who created the certificates of insurance to tell us what rights those endorsements were giving to the recipients of the COI.

Our new update now parses through every page of every PDF uploaded to our platform, and if the documents are legible, it will store that information. This opens up a whole new range of possibilities, the first of which is cancellation notice tracking, which we will be detailing in a subsequent post. While it isn't a substitute for a full compliance review, it can help identify high risk situations for businesses that lack the resources to fully review every contract and insurance policy for compliance.

We also offer a compliance analysis service at a reasonable cost to provide a more scalable way to verify your insurance coverage and give a level of certainty a pure software solution cannot deliver.

Disclaimer

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