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"Reasoned analysis": an important letter to the editor.

RE: Jerry Trupin's analysis of the ACORD 855NY form, Aug. 18

Dear Mr. Acunto,

Jerry Trupin gave Insurance Advocate readers a reasoned analysis of the ACORD 855NY form in the Aug. 18, 2014, edition of the magazine. While relevant from the certificate holders point of view, I believe it will help to provide some background and clarification on the purpose of this form.

A working group consisting of insurance industry representative and construction industry representatives developed this form over several months of deliberation. The problem arose when owners and general contractors in New York began to lack confidence in the standard ACORD 25 Certificate of Liability because of the disruption of customary insurance markets caused by unique circumstances in this state. Some safe-place-to-work sections of the Labor Law, specifically, Sections 240,241 and 241-a, impose a "strict" liability standard (as opposed to a "negligence" standard) upon owners and general contractors for workers injured at their job sites. Because of this law, it is very difficult to procure comprehensive coverage for contractors performing certain kinds of work and in certain locations.

Owners and general contractors began looking for more detailed information about the coverage afforded contractors at the job site. In response to adverse experiences with missing coverage, owners and general contractors (with their attorneys) began developing their own certificate forms in an attempt to obtain more information. In addition, some of these forms (often referred to as "attestation" forms) were designed to create legal liability for the producer issuing them with regard to warranties of coverage. This became a serious E&O problem for New York producers.

The ACORD 855NY is voluntary, but is standardized for ease of use and consistency. When required by the certificate holder, this addendum should be used to supplement the ACORD 25 with more information about the policy's coverage. It bears the ACORD 25 disclaimer language and is not intended to answer specific coverage questions, but merely to indicate areas of coverage where the solicitation of more details may be expedient (e.g., examination of the actual policy forms).

Trust me when I say that no representative of producers on the working group favored the idea of asking producers to disclose more coverage information on certificates--adding to the already heavy administrative burden. This was a compromise to avoid the attestation requests and consolidate multiple proprietary forms into a single form.

Below are my comments on some selected observations made by Mr. Trupin.

Under item A. Insurer, what certificate holders want to know is whether the insurer files its forms for approval by the Department of Financial Services. Since Excess Line and Free Trade Zone policies do not require filing, there's a good chance some of these forms will be nonstandard. Disclosing the licensing of the insurer will indicate to the certificate holder when the forms may need a little more scrutiny. This item was not intended to address the guaranty fund issue (which, by the way, only amounts to $1 million per claim).

Under item D. Additional Insured Endorsement, it was decided not to show edition dates on endorsements because it is a cumbersome process and takes a long time for ACORD to revise its forms. It will be assumed that these endorsements are the most current ISO editions, which at the present time is April 2013. If the endorsement is not the most current, it should be shown under "Other."

Finally, we are, no doubt, raising the bar on the amount and quality of the information provided to certificate holders in order to address unique circumstances in New York. Completion of the ACORD 855NY form will require greater sophistication on the part of its issuers, which is intended to increase the degree of coverage certainty for the certificate holder. However, we do not believe the form will result in more E&O exposures for producers. In fact, PIAs investment in this project primarily was made to avoid producer culpability for errors when complying with certificate holder requests.

Dan Corbin, CPCU, CIC, LUTC

Director of Research, PIANY
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Title Annotation:FOREWORD
Author:Acunto, Steve
Publication:Insurance Advocate
Article Type:Letter to the editor
Geographic Code:1U2NY
Date:Sep 29, 2014
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