1. July 12, 2011 ACORD Certificate Changes for Dummies: What has changed and what you need to know The current state of play on new ACORD forms and their impacts on contractors Presented by: Don Appleby – Willis of Colorado, Inc.Craig Merten, Willis of Colorado Debby Hull – IMA Financial Group, Inc. Darrin Weber, IMA of Texas, Inc.

2. PRESENTER BIOGRAPHIES Don Appleby has been with Willis of Colorado since 1999. His primary focus is on developing new surety clients, and he serves as a Client Advocate for existing customers. He currently serves as a Regional Director for the National Association of Surety Bond Producers, and the Associate Board of the CCA. Debby Hull is Vice-President, Quality and Audit Manager of The IMA Financial Group, Inc. in insurance operations - responsible for quality and compliance oversight. She has been involved in the insurance industry for more than 30 years. Craig Merten is the leader of the construction practice for Willis of Colorado. He has been with Willis and its predecessor companies since 1990. He maintains his Associate in Risk Management (ARM) and Chartered Property Casualty Underwriter (CPCU) professional designations. Darrin Weber is President of IMA of Texas, Inc. where he oversees the insurance and surety bond operations for the Dallas office. He is also a member of the board of directors for IMA, Inc. Darrin is chairman of the NASBP Insurance & Risk Management Committee.

3. Defining the issues What forms got changed? –Acord 24-Certificate of Property Insurance –Acord 25-Certificate of Liability Insurance –Acord 27-Evidence of Property Insurance –Acord 28-Evidence of Commercial Property Insurance For the call today we will focus on Acord 25, the most common form used for construction liability certification

4. Defining the issues Why are the forms being amended? –Certificates were being used beyond their intent Intent had been to show evidence of coverage not change it Contract requirements have grown progressively more precise and detailed Contracts demanded specific terms on certificates including trying to make them part of coverage determination –Tighter controls by insurance departments and Acord. Became evident that certificates were being issued which went beyond either the policy language or the policy was not endorsed to meet the specifications Insurance departments pushed back on certificates which were different than the policies they evidenced Acord refiled forms to bring them in line with policy language

5. The New Form

6. What is the Biggest Change and Why Is It So Important? Cancellation wording has become the biggest challenge 01/2009 version Should any of the above policies be cancelled before the expiration date thereof, the issuing insurer will endeavor to mail ____days written notice to the certificate holder named to the left but failure to do so will impose no obligation or liability of any kind upon the insurer, its agents or representatives 09/2009 version Should any of the above described policies be cancelled before the expiration date thereof, notice will be delivered in accordance with the policy provisions. Note: Acord has stated that no agent or broker can amend this cancellation wording on the certificate itself. In other words, no crossing out the language.

7. Amending the Cancellation Wording Prior wording was routinely required to be amended to remove the “endeavor” wording –Clearly contract drafters were seeking certainty in the event of cancellation that notification would be forthcoming Challenges –Certificates do not change coverage on the policy –Removing the endeavor to wording without endorsing the policies did not assure certificate holder of notification –Cancellations by carriers for other than non payment of premium very rare »Cancellation notices for non payment of premiums common but rarely are policies “fully” cancelled as premiums are typically paid in time to get reinstatements »Virtually all states allow carriers to cancel for non payment in 10 days (or similar number of days) »Carriers rarely endorse policies to give more notice due to non payment issues

8. In Reality Cancellation notices were not being sent by carriers beyond the First Named Insured on the policies –Certificate holders typically were not notified when non payment cancellations were sent New wording clarifies that the certificate can only represent what is on the policies and does not change coverage. –This is particularly true on cancellation provisions

9. How Will Certificates Show The Cancellation Provisions? If the contract requires a notification of cancellation –Certificate itself will not be amended (again we can’t “x” out the wording on the new certificate in this area) –When carrier has agreed to the cancellation change their actual endorsement will be added to the certificate –Other attachments may include Additional Insured names, Special language from the contract (again if the carrier specifically agrees) or other endorsements which may be required.

10. What’s Happening Now? As of September 2010 the new certificates were put into wide use by most brokers Early feedback falls into several categories: –New certificate is being used and a separate sheet is being used to discuss what the policies say about cancellation –Some agents are suggesting they will provide notification under “endeavor” wordings (failure to provide timely notification doesn’t create liability) –Carriers are getting bombarded with requests to amend policies to address cancellation requirements

11. What’s Happening Now? Continued: –Contract drafters are taking another look at insurance provisions knowing that a number of contractors will have a difficult time getting necessary endorsements –Carriers and brokers are reassessing what they are being asked to do and whether its possible to comply with the cert requirements

12. What’s Likely To Happen Next? Carriers are responding in many cases with filings which allow them to endorse their policies to provide notice: –Many of these will require a request by the broker to add the specific certificate holders name to either the endorsement or be on file in the event they have to be notified –We expect more “blanket” solutions will be available for larger insureds

13. What’s Likely to Happen Next –Cancellation notices of 30 days or longer will be available in many cases for cancellation for other than non payment issues –We do not expect most carriers to give up their right to cancel with the normal 10 days for cancellation due to non payment of premium

14. What’s Likely To Happen Next? Contract requirements may be reassessed –We have heard of contractors changing the wording to also require the contract signer to notify them in the event of a cancellation not just the insurer Appears this is intended to put more teeth into contract default language Contracts will be held up pending compliance –We believe this can and will be very disruptive as sub contractors in particular struggle to get compliant language on their policies and certificates –In many cases we expect that contract drafters will have to make business decisions on keeping subs on the job or allowing them to begin work

15. What’s Likely To Happen Next? We expect the situation to continue to evolve –Carriers are responding quickly now that they see the magnitude of the challenge –Acord is continuing to discuss the impacts of these changes and may provide more guidance or flexibility but difficult to tell if and when they will do so

16. Other Considerations Special types of contracts: –FAR and Federal Work: Specific requirements make these difficult FAR requirements establish minimum coverage standards including cancellation wordings but district offices have latitude to make the compliance more onerous and there is variation district by district They do not distinguish between non payment vs other reasons for cancellation/non renewal notification State and municipal contracts –Significant variation by jurisdiction –Recommend that issue be reviewed with key government owners and establish acceptability to them

17. Other Considerations Non Acord forms –Some owners have specific forms that they have drafted –In these cases they need to be sent to the carrier(s) for authorization to be issued –These are not subject to Acord copyrights but do need to comply with statutory requirements that they are addressed by the policies

18. Independent Insurance Agents of America Resources: For Non-Members: (http://www.iiaba.net/VU/NonMember/defa ult.htmhttp://www.iiaba.net/VU/NonMember/defa ult.htm The Certificate Section: http://www.iiaba.net/VU/NonMember/Certif icates.htm). http://www.iiaba.net/VU/NonMember/Certif icates.htm

19. Independent Insurance Agents of America Examining the varying marketplace positions on providing notice of policy cancellation to certificate holders. Please poll your agency staff on certificate of insurance cancellation procedures implemented within your agency and respond to this short survey: http://www.surveymonkey.com/s/M9CM CY9http://www.surveymonkey.com/s/M9CM CY9

20. Independent Insurance Agents of America The deadline for completion of the survey is 7/15/2011. If you have any additional commentary or specific experiences to share, please email them to bill.wilson@iiaba.net. For more information on the certificate of insurance issues and to view IIABA's extensive repository of industry and agency resources, please visit the Big "I" Virtual University at www.bigivu.com. www.bigivu.com

21. 20 7/12/2011 20 YOUR QUESTIONS? If you do not have the opportunity to have your question addressed during the Seminar, you may contact the presenters directly: Don Appleby – Willis of Colorado, Inc.donald.appleby@willis.com donald.appleby@willis.com Debby Hull – IMA Financial Group, Inc. Debby.hull@imacorp.com Debby.hull@imacorp.com Craig Merten, Willis of Colorado craig.merten@willis.com craig.merten@willis.com Darrin Weber, IMA of Texas, Inc.Darrin.weber@imacorp.com Darrin.weber@imacorp.com