August 24, 2017

Beware: This Settlement From a Fake Certificate of Insurance Should Make You Think Twice

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Here’s a real case study that should make every admin shiver just a little. Read what happens when inappropriate manual safeguards permit a fake certificate to slip through the cracks!

Most in the business of insurance know that fake certificates of insurance are a real threat. Unfortunately, though, many aren’t aware of how common fake certificates may be, or how a fake certificate may harm your organization. As we’ve addressed in previous posts, it’s actually not all that difficult for subcontractors to alter certificates or even download a template off of the internet that they proceed to fill out falsely (without actually having insurance)! And for compliance admins, these fake certificates can be hard to spot.

Scary, right? What’s even scarier is that recently, a significant settlement resulted from a fake certificate. In this blog post, we’ll take a look at what went wrong and what could have been prevented had the organization carefully reviewed the fake certificate and the endorsements for error or fraud.

A Case Study: City of Hartford vs. Dillon Stadium

A recent lawsuit and the certificate of insurance that was part of the settlement process has industry professionals talking about The City of Hartford vs. Dillon Stadium case. Why was this suit so different from others? It turns out, the certificate was actually a fake certificate. Let’s take a look at what happened (summarization from Property Casualty 360).

“Bruen Deldin DiDio Associates has agreed to pay the city of Hartford $350,000 after leaders accused the company of issuing a fake certificate of coverage for the project.”

“Hartford sued the firm, its vice president Jeffrey Deldin, and former vice president Scott Hainey last year following a stagnant effort to revamp the aging Dillon Stadium in Colt Park. Officials alleged the firm and its employees allegedly created a bogus certificate indicating the stadium project—along with the city—was insured when no policy had been issued.”

According to the article, a valid insurance policy would have allowed Hartford to recover more than $700,000 that, per city leaders,was misspent by the developers. “The document listed Hainey as the ‘producer’ of the certificate and Deldin signed the document as an authorized representative of the firm.”

Could The Settlement Have Been Prevented?

There seems to have been many missing pieces in the insurance compliance review process, which could have quickly resolved the issue of missing coverage. So what should have happened? The City of Hartford could have taken the following steps:

  1. Required copies of the policy endorsements in addition to the (fake) certificate of insurance
  2. Collected renewal certificates at the policy’s expiration date
  3. Confirmed continuous coverage via a quarterly tracking service

Rather than take these steps, The City of Hartford collected only a certificate of insurance and assumed coverage was in place… and stayed in place. Essentially, this caused The City of Hartford to experience significant financial loss, much of which will never be recouped.

Take the Proper Precautions to Avoid Fake Certificates/Financial Risk

Insurance tracking services like myCOI exist to help you handle the everyday tasks of managing certificates of insurance and protecting your company against underinsured claims, costly litigation and failed audits. The software is an easy-to-use, cloud-based solution developed and supported by a team of insurance professionals and is built on a foundation of insurance industry logic to automate the COI communication process and ensure you remain protected.

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