Why You Should Check The Policy's Exclusions

Just because a subcontractor gave you a Certificate of Insurance does not mean that they have all of the coverage needed to protect you. If your subcontractor’s policy has certain exclusions, you could be in BIG trouble.

If you are new to Certificates of Insurance, click here to read our "Beginners Guide to Certificates of Insurance."

A Certificate of Insurance is a document that summarizes the insurance coverage provided by an insurance policy. It typically includes the name of the insurance company, the name of the insured (the person or business that bought the insurance), the policy number, and the policy period. The certificate will also list the types of coverage and the limits of liability.

A COI form includes the names of the insured, the insurance agent, and the insurance carriers. In the middle of the form, several types of coverage are listed and described: Commercial General Liability, Automobile Liability, Umbrella/Excess Liability, and Workers Compensation and Employers Liability. This section will also say whether there is an additional insured or waiver of subrogation for each policy, the policy number, the effective and expiration dates, and the limits of each policy. All of this information is on the one page ACORD 25 form.

What a COI does not say is what exclusions are present on a policy. An exclusion states situations in which a policy does not apply. It can be important to check what these are, because they can prevent the insurance policy from helping you in certain situations.

Let’s look at a couple of examples of how exclusions could impact you.

Let’s say that you hire an electrician as a subcontractor. You see that his policy has a blanket additional insured endorsement, and you think that will cover you. What you don’t see because you didn’t read it carefully is that this endorsement excludes GCs on projects in commercial buildings–which is what your project is. Later, the electrician starts a fire and costs thousands of dollars in damages. You expect his insurance carrier to cover it, but they don’t–and you are on the hook for an expensive lawsuit.

A common exclusion on many insurance policies is for digital data damage. Typically, only physical damages are protected against, which means that you might not be covered for damages caused by Cyberattacks.

It is important to know what the exclusions on a policy are so that you can be sure you are protected. If you have any questions, please reach out to us! We are always happy to help!

For a deeper dive and to learn everything you ever wanted to know about Certificates of Insurance, click the button below to read our Guide to Certificates of Insurance.

Veritas Risk Management, Inc. offers proactive risk management services covering a wide variety of topics. Veritas Risk Management, Inc. does not engage in the practice of law, accounting, or tax consulting.  We encourage everyone to consult with his or her own professional advisor for details concerning his or her specific facts, situations, and circumstances.