Additional Insured’s Notice of Cancellation

A&E firms rely on certificates of insurance as proof of their insurance policies, including an additional insured endorsement that may be required by contract. The certificate of insurance not only shows the types of insurance policies, limits of insurance and policy period, but also requires the additional insured or certificate holder to be notified when the insurance policy is cancelled.

Specifically, the ACORD certificate of insurance states: Should any of the above described policies be cancelled before the expiration date thereof, notice will be delivered in accordance with the policy provisions.

Consequently, unless the insurance policy itself requires that a certificate holder receive notice of cancellation, no such notice need be provided. As a result, an additional insured who relied on the certificate of insurance as evidence of insurance and of its status as an additional insured is no longer guaranteed that it will receive notice of cancellation unless the policy itself affirmatively requires such notice.

The change to the ACORD certificate of insurance that removes the notice of cancellation requirement emphasizes the importance of reading the fine print — both in the policy on which you are named and in your contract with the counterparty. Although it was previously possible for a certificate-holder to rely upon a certificate of insurance and the requirement that a certificate-holder or additional insured be notified of cancellation as proof that insurance is in force, that may no longer be the case. Policyholders should consult with their trusted advisors to identify the most effective way to ensure that their commercial contracts — including their counterparty’s insurance policies — require that they be notified if insurance upon which they rely is cancelled for any reason.

You can read more about the new ACORD certificates here.