If you work in a business that requires you to hire contractors or vendors, you've probably come across certificates of insurance before. They are often requested as proof of insurance coverage. But what do they actually mean? In this post, we will give you a quick overview of Certificates of Insurance.
What is a Certificate of Insurance?
A Certificate of Insurance (COI) summarizes the insurance coverage than an insurance policy provides. A COI should include 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. It should also list the types of coverage and the limits of liability.
The Limits of a Certificate of Insurance
A Certificate of Insurance in itself does not give any rights to the certificate holder. It cannot change the policy, and it is technically not even a binding contract on the insurance agency. It is the policy itself that is binding and authoritative.
It is also important to note that the policy itself needs to indicate that you are additional insured and that there is a waiver of subrogation, the certificate alone saying it would not do anything. If you want to be named as an additional insured on the policy, or if you want waivers of subrogation (subrogation is the right of an insurer to seek reimbursement from a third party for a claim it has already paid), you need to check what the policy itself says about that. Some policies may require just a spoken agreement between the parties, others might require something in writing, and others might require a specific naming of the parties in the policy itself. Be sure to check with the insurance agency on what is needed as a statement on the certificate does not confer these rights to the certificate holder in lieu of such endorsements.
Remember that the coverage section of the certificate just states that such policies have been issued, but it does not state the scope or the limitations and exceptions of the policy. For that, you will also need to check the policy itself.
What to Do Next?
If you've been relying on Certificates of Insurance without checking the policies, it would be a good idea to check into the specifics of your subcontractor's insurance. Need help figuring out the process? We are happy to assist! Reach out to us and we can help you navigate this process so you can be confident that you and your subcontractors have the insurance you need.
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.