1. Forms
2. IL
3. IL-12-01

Form IL 12 01: Policy Changes

1. What the form is

The IL 12 01, titled "Policy Changes," is a standard Interline endorsement form used in the insurance industry. Its primary purpose is to document and formalize various modifications, additions, or deletions to an existing insurance policy that have been mutually agreed upon by the insurer and the named insured. This form acts as a generic template where specific changes can be detailed, ensuring there is a written record of alterations to the original policy terms. It is an essential tool for maintaining an accurate and up-to-date reflection of the coverage in force, as policy terms can only be amended or waived by an endorsement issued by the insurer and made part of the policy.

2. Classes of business it applies to

As an Interline form (IL), the IL 12 01 is not specific to a single line of business but can be used across various commercial (and sometimes personal, though less common for this specific "IL" designated form) lines of insurance that utilize a policy structure allowing for endorsements. Its generic nature allows it to be broadly applicable whenever a policy needs alteration. Examples of where this form would be utilized include:

• Commercial Property: Changing covered locations, adding or removing scheduled property, or modifying property limits. For instance, a business acquiring a new building would use this form to add that location and its corresponding coverage details to their existing property policy.
• Commercial General Liability (CGL): Amending classifications, updating exposure bases (like payroll or sales figures), or adding specific operations. For example, a contractor expanding their services into a new type of work might have their CGL policy endorsed using IL 12 01 to reflect this change in operations and any associated premium adjustments.
• Commercial Auto: Adding or removing vehicles, changing usage types, or updating driver information.
• Inland Marine: Modifying schedules of covered equipment or adjusting limits for specific items.
• Package Policies (e.g., Commercial Package Policy - CPP): Since CPPs combine multiple lines of coverage, the IL 12 01 can be used to document changes affecting one or more of those coverage parts.

Essentially, any policy that is part of a program (like those using ISO forms) that allows for changes via endorsement could potentially use a form like IL 12 01 if a more specific endorsement form isn't available or appropriate for the particular change being made.

3. Special considerations

There are several important considerations when utilizing the IL 12 01:

• Specificity is Key: While the form itself is generic, the changes documented on it must be clear, specific, and unambiguous. It should detail exactly what is being changed, the effective date of the change, any premium impact (additional or return premium), and which coverage parts are affected.
• Agreement and Authorization: The changes documented must be agreed upon by both the insurer and the first Named Insured (who is typically authorized to make changes to the policy with the insurer's consent). The form usually requires the signature of an authorized representative of the insurer.
• Regulatory Scrutiny (Blank Endorsements): Some state insurance departments have specific rules or concerns regarding "blank" or "general purpose" endorsement forms like the IL 12 01.
  • For example, Kentucky's Department of Insurance initially did not approve such blank endorsements due to concerns that policies could be amended without prior regulatory approval of the specific change language. They later allowed their use under strict stipulations, such as requiring accompanying underwriting rules, a disclaimer preventing its use to restrict coverage or act as a renewal certificate without proper justification, and an insured's acknowledgment signature.
  • Illinois has regulations stating that blank endorsements cannot be used to decrease coverage, increase rates or deductibles, or negatively alter policy terms unless specifically requested by the insured.
• Attachment of Other Forms: If the IL 12 01 is used to document the addition or alteration of other specific forms or schedules (e.g., adding a new location schedule), those completed forms should be attached to and referenced on the IL 12 01.
• Edition Dates: When making changes to forms or coverages, it's crucial to note the edition dates of any forms being added, removed, or modified, as different editions can have significant variations in coverage.
• Not a Replacement for Specific Endorsements: While versatile, the IL 12 01 should not be used as a shortcut when a more specific, approved endorsement form exists for the type of change being made. Insurers often have a portfolio of specific endorsements designed for common policy alterations.

4. Key information for agents and underwriters

• Pricing and Premium Adjustments: Any change documented on the IL 12 01 that affects the exposure or coverage must be accompanied by a corresponding premium adjustment. This includes calculating additional premium for increased exposures or return premium for decreased exposures, often on a pro-rata or short-rate basis depending on policy conditions and who initiated the change. Agents need to clearly explain these premium impacts to the insured.
• Risk Assessment: Underwriters must carefully assess the impact of any change made via the IL 12 01 on the overall risk profile of the insured. Adding a new, higher-risk operation or location, for example, requires thorough underwriting review even if documented on this general form. The form should clearly state the new rates, premium basis, and any changes to form editions.
• Coverage Gaps and Overlaps: When making changes, especially to complex policies or by adding endorsements, agents and underwriters should be vigilant about potential coverage gaps or unintended overlaps that might arise. The IL 12 01 should clearly articulate the intended scope of the change to minimize such issues.
• Underwriting Guidelines and Authority: Underwriters must ensure that any change processed using the IL 12 01 adheres to the company's underwriting guidelines and that the individual processing the change has the appropriate authority. Certain changes may require higher levels of approval. Endorsements typically cannot be processed with an effective date prior to when the insured or agent requested the change in writing, with exceptions requiring underwriter approval.
• Documentation and Record Keeping: The IL 12 01 is a critical part of the policy record. Accurate and complete documentation on this form is essential for claim handling, audits, and future policy renewals. All details, including effective dates, premiums, and specific language of the change, must be meticulously recorded.
• Clarity for Claims: In the event of a claim, the policy, including all endorsements like the IL 12 01, will be reviewed to determine coverage. Ambiguous language on an endorsement can lead to disputes. Therefore, the wording used to describe the change must be precise.