What is a Certificate of Financial Responsibility (CFR)?

A Certificate of Financial Responsibility (CFR) is a document that serves as proof that an individual or business has the necessary amount of insurance coverage or assets to meet financial obligations imposed by state or federal law. This certificate is often required in situations where there is a high risk of environmental damage, such as in the oil and gas industry, or in cases where an individual has been involved in legal issues such as driving under the influence (DUI).

In auto insurance, a CFR, or SR22 or FR-44 in some states, is a document filed by the insurance company to the state’s Department of Motor Vehicles (DMV) on behalf of the insured individual. It certifies that the individual carries the minimum required liability insurance. This is often required after certain traffic-related offenses such as DUI, reckless driving, or driving without insurance. The CFR is not an insurance policy itself. Still, a form attached to an auto insurance policy guarantees the insurer will cover the driver’s liability up to a certain amount.

In the context of environmental liability, a CFR is a document that demonstrates a company’s ability to pay for potential environmental damages. For example, the Oil Pollution Act of 1990 requires certain facilities to obtain a CFR demonstrating their ability to pay for oil spill cleanup costs and damages.

In both cases, the CFR guarantees the state or federal government that the individual or company has the financial means to cover potential damages or liabilities. Failure to maintain a CFR when required can result in legal penalties, including fines and suspension of driving or operating privileges.