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Certificates of Insurance – Delaware Increases Fraud Enforcement


Certificates of Insurance – Delaware Toughens On Improper Use

A big change in Certificates of Insurance  (Certs) – Delaware recently decided to increase the enforcement of their laws by amending their old laws on improper certificate use.

Certs have long been a bane of premium auditors nationwide which has resulted in complete refusal of any presented to them.Delaware also brought job banks to light as a great risk management tool in 2013 when a bill was passed that required job banks by employers.  The article on job banks is one of the most popular on this blog.  More states should look at adding the job bank law.

Map Of Delaware Certificates of Insurance In Logo

The new Certs law bans any request for by any party for an untruthful certificate.  Agents were producing this type of certificates to keep the employer’s business.

The basic tenets of the law are that any party cannot:

  • Request of a certificate that does not accurately reflect the underlying policy
  • Issue of a false or misleading certificate or one that purports to alter, amend or extend the coverage provided by the insurance policy
  • Use of a certificate to warrant that a policy complies with the insurance or indemnification requests of a contract

The legislation also enables the Delaware Department of Insurance to issue cease-and-desist orders and to assess fines against those who request false or misleading certs.

The main part of the bill without the term definition clauses is:

4503.  Certificate forms.

Graphic Of Certificates of Insurance Icon

(a) The Commissioner shall prohibit the use of a certificate of insurance form if the form:

(1) Is unfair, misleading, or deceptive, or violates public policy; or

(2) Violates any law, including any regulation promulgated by the commissioner of insurance.

(b) 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 shall not confer to any person new or additional rights beyond what the referenced policy of insurance expressly provides.

4504.  Limitations on use.

(a) A person shall not:

(1) 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

(2) Prepare, issue, request, or require the issuance of a certificate of insurance that purports to affirmatively or negatively alternegatively alter, amend, or extend the coverage provided by the policy of insurance to which the certificate of insurance makes reference.

Graphic Of Certificates of Insurance Paper Agreement

(b) A certificate of insurance shall 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 shall not be interpreted as doing such.

§ 4505.  Notice requirements.

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.

§ 4506.  Applicability.

(a) The provisions of this Act shall apply to all certificates of insurance issued in connection with property, operations, or risks located in this State, regardless of where the policyholder, insurer, insurance producer, or person requesting or requiring the issuance of a certificate of insurance is located.

(b) A certificate of insurance or any other document or correspondence prepared, issued, requested, or required in violation of this Act shall be null and void.

§ 4507.  Enforcement and Penalties.

(a) The Commissioner shall have 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 this Act.

Graphic of Approved Stamp Certificates of Insurance Text
Wikimedia Commons – Majays31

(b) The Commissioner shall have the power to enforce the provisions of this 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 this Act.

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

Section 2. Effective Date.

This Act shall take effect 90 days after enactment.

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James J Moore - Workers Comp Expert

Raleigh, NC, United States

About The Author...

James founded a Workers’ Compensation consulting firm, J&L Risk Management Consultants, Inc. in 1996. J&L’s mission is to reduce our clients’ Workers Compensation premiums by using time-tested techniques. J&L’s claims, premium, reserve and Experience Mod reviews have saved employers over $9.8 million in earned premiums over the last three years. J&L has saved numerous companies from bankruptcy proceedings as a result of insurance overpayments.

James has over 27 years of experience in insurance claims, audit, and underwriting, specializing in Workers’ Compensation. He has supervised, and managed the administration of Workers’ Compensation claims, and underwriting in over 45 states. His professional experience includes being the Director of Risk Management for the North Carolina School Boards Association. He created a very successful Workers’ Compensation Injury Rehabilitation Unit for school personnel.

James’s educational background, which centered on computer technology, culminated in earning a Masters of Business Administration (MBA); an Associate in Claims designation (AIC); and an Associate in Risk Management designation (ARM). He is a Chartered Financial Consultant (ChFC) and a licensed financial advisor. The NC Department of Insurance has certified him as an insurance instructor. He also possesses a Bachelors’ Degree in Actuarial Science.

LexisNexis has twice recognized his blog as one of the Top 25 Blogs on Workers’ Compensation. J&L has been listed in AM Best’s Preferred Providers Directory for Insurance Experts – Workers Compensation for over eight years. He recently won the prestigious Baucom Shine Lifetime Achievement Award for his volunteer contributions to the area of risk management and safety. James was recently named as an instructor for the prestigious Insurance Academy.

James is on the Board of Directors and Treasurer of the North Carolina Mid-State Safety Council. He has published two manuals on Workers’ Compensation and three different claims processing manuals. He has also written and has been quoted in numerous articles on reducing Workers’ Compensation costs for public and private employers. James publishes a weekly newsletter with 7,000 readers.

He currently possess press credentials and am invited to various national Workers Compensation conferences as a reporter.

James’s articles or interviews on Workers’ Compensation have appeared in the following publications or websites:

  • Risk and Insurance Management Society (RIMS)
  • Entrepreneur Magazine
  • Bloomberg Business News
  • WorkCompCentral.com
  • Claims Magazine
  • Risk & Insurance Magazine
  • Insurance Journal
  • Workers Compensation.com
  • LinkedIn, Twitter, Facebook and other social media sites
  • Various trade publications


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