A certificate of insurance is a document issued by an insurance producer or company that may be used and is often relied upon to verify the existence of insurance coverage. It may be requested by a party where liability and large losses are of concern as evidence that such liabilities will be covered by an insurer in the event of damages. Such certificates are widely presented by contractors, for example, as proof that they have in place the insurance coverage required by the contract or bid documents.  The certificate constitutes evidenceof insurance, however; it is not the contract of insurance. As such, it can create a number of pitfalls and problems and has the potential for fraud and abuse. Given these issues, it is surprising that certificates of insurance have not been subject to legislative standards or regulatory oversight in this State. 

Recent New Jersey legislation, based on an National Association of Insurance Commissioners Model Act and passed in both Houses on December 17, 2015, seeks to change that. On November 16, 2015, Assembly No. 4705, the “Certificates of Insurance Act,” was introduced and referred to the Assembly Financial Institutions and Insurance Committee.  An identical bill, Senate No. 3270, was introduced in the Senate on December 7, 2015, reported from the Senate Committee on December 10, and passed in the Senate (38-0) and in the Assembly (67-0-0) on December 17, 2015. It now awaits Governor Christie’s signature.

Under the bill, the Commissioner of Banking and Insurance (Commissioner) is delegated the express authority to prohibit the use of a certificate of insurance if the form is “unfair, misleading, or deceptive, or violates public policy;” or if it violates any law or any regulation promulgated by the Commissioner.   The bill also clarifies that a certificate of insurance is not to be considered a policy of insurance and shall not amend, extend or alter the coverage afforded by the policy; nor shall it confer any new or additional rights beyond those referenced expressly in the policy.  Any document issued in violation of the act is null and void, and any false or misleading action thereunder constitutes a violation of the New Jersey Insurance Fraud Prevention Act, N.J.S.A. 17:33A-1 et seq.  

The act applies to all certificates issued in connection with property, operations or risks located in New Jersey, regardless of where the policyholder, insurer, producer or party requesting the certificate is located. A copy of the bill may be accessed here.