December 7, 2016

Why a Certificate of Insurance Is Not Enough

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As a compliance manager or administrator for your organization, we know you have many tasks on your plate that involve more than collecting and reviewing certificates of insurance for each of your vendors and contractors. It’s difficult to find the time to review endorsements to ensure your vendor’s insurance agency has done their job appropriately. But nonetheless, it is very important that you collect and review the certificates and additional endorsements, such as your vendor’s additional insured and waiver of subrogation documents, so you don’t run the risk of your vendor’s agent providing the wrong (or not enough) coverage.

The Risk of Errors and Omissions

Regardless of how experienced you may be at collecting and reviewing certificates to verify compliance, much of the risk lies in the person issuing the documents from the insurance agency. Most of the time, the individual handling the paperwork is not a licensed agent, and in fact, they aren’t required to be licensed. Often times, the individual doing the admin work on policies is a part-time employee that doesn’t have an insurance background to be able to ensure that everything on the certificate is actually correct.

Even if not intentional, it is all too easy for the insurance agency administrator to free form an error in the “Description of Operations” box that is inaccurate. Therefore, because there is no checks and balances process in the agency management system, this could put your organization at significant risk. The information listed on the forms is what the court will use in any claims, regardless of what should have been listed.

Because of this, it is vitally important to request the copies of the additional insured and waiver of subrogation endorsement to confirm those requirements. As your organization’s compliance admin, you should never simply trust what is listed on the certificate of insurance without verifying across other documents. In addition, fraudulent certificates are real and some vendors will unfortunately do this as a way to cheat the system and save on costs. By collecting the additional endorsements, you will avoid a potential nightmare.

A Certificate Isn’t Enough

As you can see, it’s simply not enough to check the boxes on collecting and reviewing the certificate of insurance without reviewing the other supporting documents, such as the additional insured and waiver of subrogation endorsements.

Don’t wait until it’s too late to determine if there are gaps in coverage. Organizations must protect themselves by reviewing the terms of their contracts, checking their commercial general liability (CGL) policies and other endorsements. It’s especially important to ensure that adequate coverage limits and acceptable coverage for completed operations is in place. As a compliance administrator that’s on the front lines, consider all of these items as part of an overall risk management plan.

Always Be in the Know

myCOI exists for one reason: to help you handle the everyday tasks of managing certificates of insurance and protecting your company against underinsured claims, costly litigation and failed audits. Their insurance certificate tracking software is an easy-to-use, cloud-based solution developed and supported by a team of insurance professionals and is built on a foundation of insurance industry logic to automate the COI communication process and ensure you remain protected.

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