National Conference of Insurance Legislators (NCOIL) Urges Property Casualty, Lender Industry Compromise on New Insurance Binder Form
Mar 14, 2013
In their latest effort to resolve a long-running dispute between the lender and property/casualty industries over the forms that lenders use to verify insurance coverage, legislators at the recently concluded National Conference of Insurance Legislators (“NCOIL”) Spring Meeting urged interested parties to develop an expanded ACORD binder form, rather than resurrect debate over a 2012 NCOIL binder model law.
NCOIL’s Property-Casualty Insurance Committee (“Committee”) asked to see a final version of the controversial ACORD document (tentatively called an ACORD 875) at the July 2013 NCOIL Summer Meeting.
According to Chairman and Indiana State Representative Matt Lehman following the Committee’s March 10 session, “What we tried to do was get the parties back on track to develop an enhanced binder form, rather than re-open a model that we passed unanimously. An ACORD 875 should resolve differences between lenders and the property and casualty industry, and bring conclusion to this long-running NCOIL debate.”
As highlighted at the March 10 meeting, the proposed ACORD 875 is viewed as a compromise, because it would meld an ACORD 28 insurance certificate, which the property and casualty industry asserts is purely informational, with an ACORD 75 binder form, which is less detailed, but does count as official proof of coverage before a policy is issued.
Lenders argued that, when NCOIL was considering a Certificates of Insurance Model Act in 2011 and 2012, certificates could not be for “information-only” because, if a policy is not available, then lenders need some other detailed form to prove coverage before closing on a loan.
Not content with simply standing by and waiting for industry members to take action, Representative Lehman on March 10 committed his own time to participate in future ACORD efforts in order to jump-start negotiations. In doing so, he secured tentative commitments from property and casualty representatives that they would work toward a final ACORD form by the 2013 Summer Meeting.
Lenders asked to see what objections the property and casualty industry had raised in previous 875 efforts before they also could commit to such a timeframe.
Interested parties at the meeting acknowledged that development of the enhanced ACORD form, including the extent to which lenders have a say in negotiations, has been fraught with controversy. ACORD members defeated an initial version of the proposed 875 document in September 2012.
The NCOIL Model Act Regarding Use of Insurance Binders as Evidence of Coverage, which was adopted in response to lender concerns with the NCOIL certificates model, keeps binders in force until a policy is issued or canceled by an insurer.
Proposed amendments set aside by the Committee in order to promote development of the enhanced ACORD form were submitted by Prudential Financial and sponsored for discussion by Representative Lehman. The amendments would have, among other actions:
- Required a binder to include details regarding limits, sub-limits, exclusions and deductibles
- Required an agent or broker (or insurer if no agent or broker is involved) to deliver a policy or binder to both the insured and the lender within five business days following an insured or lender request
- Established that a lender could still require a borrower to give the lender a copy of the policy or proof of coverage as a condition of making the loan
NCOIL’s Summer Meeting is slated for July 11 through 14 in Philadelphia, Pennsylvania.
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