February 4, 2020 | Bill Phelps
A Certificate of Insurance is not Insurance
“THIS CERTIFICATE IS ISSUED AS A MATTER OF INFORMATION ONLY…….” This is what the standard COI form (ACORD 25) states immediately after the document title. The Certificate of Insurance is a document which identifies important aspects of an Insured’s insurance policy or policies. It will give the holder information regarding insurance companies, policy numbers, policy dates and limits. This data is very important. You should know these details of your subcontractor’s insurance program or an Owner to know these details about your program. But the only document that confers coverage is the policy itself. An insurance policy is a contract between two parties that outlines the specifics of what one party will do given a certain set of circumstances. These circumstances are conveyed in that contract and cannot be summarized in a one- or two-page COI. I like to think of the COI as a book summary. Important information but the book is really what tells the story.
It cannot change coverage.
Since the COI is not an insurance policy, by itself, it cannot change the coverage. The only way to modify a policy, to extend or restrict coverage, is via an endorsement. For example, Additional Insureds or a waiver of subrogation can only be accomplished via an endorsement to the policy. If you deem a coverage to be particularly important (i.e. Additional Insured) then it is a good practice to get a copy of that endorsement. Remember not all language is standardized so these documents will not all read the same or provide the same coverage. Your insurance advisor can help you understand the differences between the varying language.
Where did it come from?
The Certificate of Insurance is a “certification” of the insurance coverage. For this reason, the documentation should come from a source that has the credibility and expertise to provide such certification. In other words, the COI should come from the insurance agent. You should read the issued document. Make sure it is signed by the producer. If not, ask questions. It is your responsibility to verify, as best you are able, that the document is legitimate and credible.
When used properly it is a great risk management tool.
When you hire a subcontractor, you expect them to be accountable for any injury or damages they cause. The subcontractor’s insurance policy is one mechanism that provides the resources to pay for these obligations. As a practical matter you are not able to obtain and review the entire insurance policy of your subcontractors for compliance with a contract agreement. So,the COI is a very good tool to assess the acceptability of the subcontractor’s insurance program. Not perfect but with due diligence it is a very good tool for managing the risks of your subs.