Certificates of Insurance
A certificate of insurance (COI) is an often-used document in the construction world. A contractor or tradesman who is bidding on a job or signing a contract to do work might be posed with a requirement to show a COI. The concept of a COI is simple – it provides proof that the contractor is insured – but the details behind getting them issued can be a true challenge.
Any contractor who has been on the job is familiar with the “last-minute call” to their insurance agent to get a copy of a COI so they can get on the job site. Often, it comes with fingers crossed that the document will be sufficient and not further delay the work. Speed is key for the contractor. Accuracy is key for everyone else.
As a specialized broker in West Texas and Southern New Mexico (El Paso, Las Cruces, and surrounding areas), we pride ourselves on issuing COIs for our customers both quickly and accurately.
What a COI provides – and what it doesn’t provide
A certificate of insurance is typically provided on a pre-written, industry-agreed form number 25 published by ACORD (Association for Operations Research and Development), typically referred to as an ACORD-25 or Cert. The page allows an insurance broker to list the various liability policies that a client has purchased. Dates of the policies, limits, and carrier names are provided and the form provides a nice little block for a “signature” to validate the coverage. Certificates can be further annotated to show special endorsements such as “additional insured” status, waivers of subrogation, and other benefits.
COIs also provide an area to list the name of the company that has requested the certificate, known as the certificate holder. However, being a certificate holder conveys no special coverage or benefits other than they have been “informed” that coverage exists.
However, the most important part of a certificate is actually a pre-printed disclaimer at the top which indicates the COI does not “…alter the coverage afforded by the policies…” This disclaimer confirms that the policy is paramount, and even if the COI is wrong, it won’t change the coverage. If a contractor produced a COI that showed $5,000,000 in coverage when in reality his policy was only for $100,000, then the carrier is only on the hook for the $100,000 regardless of the COI.
Most certificates of insurance are produced in the broker’s office, not at the carrier. So, the certificate accuracy is only as good as the broker producing it. Prior to finalizing a COI, a good broker will go back into the underlying policy, review the limits and conditions, and ensure the COI reflects the reality of the policy. Not all brokers do that.
Speed of a COI
Because most COIs are created by the Broker, the speed to get a Cert issued is directly dependent on the structure, emphasis, staffing, and priority agencies place on issuing COIs. Partly because of the accuracy issue, described above, many larger brokers relegate the issuance of COIs to a centralized service group. It’s often a first come first serve priority queue and local offices can’t influence the issuance.
This is often an advantage of local or regional brokers, such as Mt. Franklin Insurance, where COI issuance is handled in the local office and can be done within a few minutes. Our account managers are all trained and authorized to issue certificates immediately, so a pressing matter can be taken care of quickly.
The Policy Must Be Correct
However, it is important to remember that the underlying policy prevails. Therefore, a request for certain coverage on a certificate might prompt us (or any other broker) to make changes to the underlying policy. Costs to issue a certificate are often related to changed required on the underlying policy.
The worse situation is a rushed certificate that doesn’t match the policy. If a claim occurs that a policy doesn’t cover, there will be allegations of misrepresentation on the client and broker. It’s best to make sure the policy is consistent with the certificate.
Summary
As a new or experienced contractor, you will often encounter job opportunities that require certificates of insurance to be produced. It’s important that you are working with a trusted local advisor that can meet with you, review the coverage, and ensure timely and accurate issuance of certificates of insurance. Local and regional brokers, like Mt. Franklin Insurance, can often provide faster and better service for these coverage needs and certificates of insurance because everything is handled locally. Call us today at (915) 599-2900 or visit www.MtFranklin.com to see how we can help you