Contractors should be aware of a New Jersey law that could cause them to be found liable for insurance fraud if they provide insurance certificates to owners containing false or misleading information.

The new law, which goes into effect on April 10, 2016, makes providing, or demanding the issuance of, an insurance certificate that contains false or misleading information concerning property or casualty insurance coverage a violation of the New Jersey Insurance Fraud Prevention Act (“Fraud Act”).

Violations of the Fraud Act are punishable by fines and penalties ranging from $5,000 to $15,000, depending on the number of violations. Insurance certificates are commonly provided by contractors to owners on construction projects as an assurance that the contractor holds the contractually-required insurance coverages. The new law is aimed at curbing the practice of falsely representing the extent of an insured's coverages.

The law applies to any person who prepares, presents or causes to be presented to any insurer or other person, or demands or requires the issuance of, a certificate of insurance that contains false or misleading information concerning the insurance policy to which the certificate refers, and to any person who assists, solicits or conspires with another to do any of these acts.

Contractors must take care to ensure that the information in insurance certificates they provide to owners accurately describes the coverages of the underlying policies. The new law also underscores the fact that insurance certificates do not constitute proof of coverage. Owners seeking assurances of coverage should require contractors to provide the actual policies, including endorsements, in order to confirm that a contractor holds the required coverages.