Deviations from Policy Forms

The Department recently issued two Office of General Counsel Opinions related to unapproved deviations from policy forms. Most recently, on January 31, 2011, in OGC Op. No. 11-01-08, the Department opined that an insurance agent or broker may not complete a certificate of insurance that purports to amend, expand, or otherwise alter the terms of the underlying insurance policy.

The Department explained that a certificate of insurance is evidence that an insurance policy is in effect, and summarizes the terms, conditions, and period of an insurance policy, but it is not the contract itself. That is, “[a] certificate of insurance cannot confer new or additional rights beyond those set forth in the referenced insurance policy.” The rationale is that if a provision of the certificate alters insurance coverage, it would be considered a policy form that would have to be filed with the Department. This is required under Section 2307 of the Insurance Law which provides that insurers may not deliver or issue for delivery any policy forms (unless certain exceptions apply), without the Superintendent’s approval, or thirty days have elapsed and the Superintendent has not disapproved such forms as misleading or violative of public policy.

This OGC Opinion follows a December 2, 2010, OGC Opinion (No. 10- 12-01), wherein the Department made clear, in the context of a homeowner’s insurance policy, that there is no exception in Section 2307 of the Insurance Law that permits an insurer’s filing requirements to be waived. This is true even if an insured consents to the terms of the unapproved form.

Likewise, a homeowners’ insurer may not deviate from its filed rates without the Superintendent’s approval, even if the insured consents to the change in rates. Section 2314 of the Insurance Law prohibits an insurer from charging a rate or receiving a premium that deviates from the insurer’s filed rates. Although Section 2309 of the Insurance Law permits an excess rate to be filed and approved by the Superintendent based on a “consent-torisk” letter, the Superintendent must approve the “consent-to-rate” letter. Therefore, an insured cannot simply agree to an increased rate without the Superintendent’s prior approval. Therefore, insurers, agents, and brokers cannot effectively deviate from approved policy forms by issuing certificates of insurance that alter the policy terms or by deviating from their approved forms and rates, at least in the context of homeowners’ insurance. The rule of thumb is that where a policy is filed and approved, any purported deviations, whether by endorsement, certificate, or insured’s consent, must be filed and approved.