Detecting fraudulent insurance certificates

This is a useless piece of trivia for you. Do you know the old saying that something “isn’t worth the paper it’s written on”? This saying appears to have originated in 1861, when Count Bernhard von Rechberg and Rothenloen (do you remember him?), an Austrian statesman, were presented with a document recognizing Italy as a nation-state, and first uttered these now familiar words.

You may want to remember Count Johann’s opinion the next time someone shows an insurance certificate. As you probably know, a certificate of insurance is a document, usually issued by an insurance broker, which is supposed to check the existence and conditions of an insurance policy. It’s a common occurrence in the construction industry, where contractors and subcontractors are generally required to carry certain types of coverage, but in truth, your car’s insurance card is also a type of certificate of insurance. An insurance certificate is one of the most important documents you can review in connection with your employment contract, because if something goes wrong, you may need to click on that coverage.

The problem is that when it comes to enforcing the terms of coverage contained in a certificate of insurance, the certificate of insurance is essentially worthless. It is just a statement written by an insurance broker, not an actual policy. While it may get the broker or policyholder in trouble for negligence or misrepresentation if it is not true, it does not create any rights against the insurance company.

In one case outside of Illinois, for example, the question was whether a certificate of insurance created rights for the (United) landlord under the roofer (Taylor) contractor’s general liability policy. The testimony stated that United was covered by Taylor’s policy. The problem was, unbeknownst to United, that the policy itself did not provide such coverage. A United employee fell off a ladder presented by Taylor. Being America, the employee sued Taylor, who then sued United (the classic “claim” scenario).

The court ruled that United had no coverage, writing: “The certificate issued to United Stationers was sufficient warning that it could not simply rely on the certificate for the terms and conditions of coverage, including whether it was additionally insured under a CGL policy.” As the court emphatically stated: “The policy shall govern the extent and terms of coverage.” You can read the case, United Stationers v. Zurich Americanby clicking over here.

The united The case may have involved paperwork confusion, but some cases involve outright fraud. We recently dealt with an issue in which a contractor forged the insurance certificate required under a contract, possibly because they could not afford the actual coverage. This happens more often than you think. Anyone can really easily forge an insurance certificate. Suppose a subcontractor you worked with before was having financial problems. He lets his politics lapse, but he needs work, so he uses the miracle of modern technology to “modify” an existing certificate. Or someone decides to start their own store. Insurance is expensive, so a budding entrepreneur takes a testimonial from a previous employer, applies a few keystrokes, and presto! The new process is suddenly “locked”. Or, the subcontractor has a very basic policy that does not include contractually required provisions, such as basic and non-contributory language, or the necessary “extra secured” endorsement. Again, through a miracle of technology, he can make some “modifications” to an old certificate and submit it.

And the potential fraud does not even need an existing document “doctor.” There are websites that offer blank insurance certificates that anyone can fill out.

(By the way, for the New Jersey case involving forged testimony, take a look at Mendoza vs Diaza2016 decision of the Appeals Chamber, which you can access over here. Mendoza It included a forged worker’s compensation certificate submitted by the roofing contractor.)

Anytime you receive a certificate of insurance, you should contact the broker whose name appears on the certificate to verify that coverage actually exists, and that the broker is a legitimate institution. In an ideal world, you should also ask to see the actual policy, although in practice contractors and subcontractors are very resistant to this. (Which leads to the question: Why?)

There are also some obvious red flags, such as the following:

  • If your insurance certificate appears worn, looks blurry, or has uneven lines, you may be dealing with forgery. Anytime the broker issues a legitimate Certificate of Insurance, a new one will appear. Also, most brokers use the Acord-25 certification form. Check the lower right corner of the certificate for the words “Acord-25”.
  • Automated certificate systems use the same font throughout the document. If the font in the document does not match, then this is a sign of forgery.
  • If you look closely at the document, and it appears that bleaching was used (eg white dots inside letters, or inside sentences), red flag.
  • Does the contact information for the insurance broker appear in the document? If not, your acquaintances at work may try to prevent you from verifying that the coverage is valid. red flag

There are some simple ways to “trust but verify”. First, simply contact the broker listed on the certificate and ask. (Confirm what it tells you in a follow-up email.) Second, for workers compensation coverage only, you may be able to verify coverage with the New Jersey Compensation Inspection and Classification Office. You can access the NJCRIB website by clicking over here. Other countries have similar verification services. Third, you can request an insurance certificate directly from the insurance broker. Most brokers will be happy to accommodate you. And fourth, you can and should require copies of all policy approvals to be attached to the certificate.

Otherwise… you might have a document that isn’t worth the paper it’s written on.

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