Delaware Legislative Update

Delaware Legislative Update

The Delaware legislature recently enacted the Certificates of Insurance Act (“Act”), effective August 5, 2014.

 

DELAWARE HOUSE BILL 104

 

“Certificate of insurance” means a document or instrument, regardless of how titled or described, that is prepared or issued by an insurer or insurance producer as evidence of property or casualty insurance coverage.  The term does not include a policy of insurance, insurance binder, policy endorsement, or automobile insurance identification or information card.

 

“Insurance producer” means a person required to be licensed under Delaware law to sell, solicit, or negotiate property or casualty insurance.

 

“Insurer” means any organization that issues property or casualty insurance.

 

“Person” means any individual, partnership, corporation, association, or other legal entity, including any government or governmental subdivision or agency.

 

The Delaware Insurance Commissioner (“Commissioner”) prohibits the use of a certificate of insurance form if the form:

  • Is unfair, misleading, or deceptive, or violates public policy; or
  • Violates any law, including any regulation promulgated by the Commissioner.

 

A certificate of insurance is not a policy of insurance and does not affirmatively or negatively amend, extend, or alter the coverage afforded by the policy to which the certificate of insurance makes reference.  A certificate of insurance does not provide any person with new or additional rights beyond what the referenced policy of insurance expressly provides.

 

A person must not:

  • Prepare, issue, or request or require the issuance of a certificate of insurance that contains any false or misleading information concerning the policy of insurance to which the certificate of insurance makes reference; or
  • Prepare, issue, request, or require the issuance of a certificate of insurance that purports to affirmatively or negatively alter, amend, or extend the coverage provided by the policy of insurance to which the certificate of insurance makes reference.

 

A certificate of insurance does not warrant that the policy of insurance referenced in the certificate comply with the insurance or indemnification requirements of a contract, and the inclusion of a contract number or description within a certificate of insurance must not be interpreted as doing so.

 

A person is entitled to notice of cancellation, nonrenewal, or any material change, and to any similar notice concerning a policy of insurance only if the person has such notice rights under the terms of the policy of insurance or any endorsement to the policy.  The terms and conditions of the notice are governed by the policy of insurance or endorsement and may not be altered by a certificate of insurance.

 

The Act applies to all certificates of insurance issued in connection with property, operations, or risks located in Delaware, regardless of where the policyholder, insurer, insurance producer, or person requesting or requiring the issuance of a certificate of insurance is located.

 

A certificate of insurance or any other document or correspondence prepared, issued, requested, or required in violation of the Act is null and void.

 

The Commissioner has the power to examine and investigate the activities of any person that the Commissioner reasonably believes has been or is engaged in an act or practice prohibited by the Act.

 

The Commissioner has the power to enforce the Act, including the authority to issue orders to cease and desist and to impose a fine of up to $1,000 per violation against any person who violates the Act.

 

The Commissioner may adopt reasonable rules and regulations as are necessary or proper to carry out the provisions of the Act.