Common Certificate of Insurance
There are a number of issues that regularly surface when administering certificates of insurance and fulfilling contractual requirements. Read on for a list of 6 common problems that surround insurance certificates and the corresponding ways that they can be resolved.
Policy Coverage Cannot be Altered by Certificates of Insurance
Certificate holders are routinely misled by insurance certificates when employees edit COI information. This occurs when they misinterpret the coverages represented on the document as their contractual obligations. However, a certificate of insurance cannot amend or alter a policy without an official endorsement issued by the carrier that explicitly outlines the added, revised, or extended coverage. Over 45 states have passed pertinent regulations surrounding certificates of insurance to protect all parties involved, including making it illegal to intentionally misrepresent policy information on an insurance certificate.
Coverage Continues to be Misinterpreted on Insurance Certificates
The misrepresentation of coverage frequently occurs when a party is being renamed as an additional insured, and in matters that concern environmental coverage. Without the proper supporting endorsement demonstrating that an additional insured is in effect, the certificate holder could be held liable for damages that occur at a worksite. All-encompassing additional insured endorsements are occasionally used but are not the best solution for satisfying requirements. This is because there must be a direct contractual agreement between the insured and the liable parties in order for coverage to be applicable.
Contractual Reviews
Many contractors solicit the help of their insurance agent to review the cumbersome requirements included in their contracts. To do this, they rely heavily on their agent’s expertise to provide coverage recommendations that comply with the stipulations outlined in the contract.
Due to the complex nature of contracts, such as those in the construction sector, insurance brokers and agents need to be properly educated in order to fully understand the insured’s obligations. With such a high risk of human error occurring, the responsible party for issuing the certificate should seek counsel from their attorney before taking action. This is an effective method for eliminating the liability that arises from misreading intricate contracts.
How Insurers Can Avoid Professional Errors and Omissions
Carriers and brokers should not quote the wording stated in a contract on the actual certificate, as specified in the instructions section of the COI certificate. Instead, insurers should examine contractual requirements side by side with the in-force policy to determine any deficiencies.
In addition, it’s important to fully understand the working relationships of all parties involved in the contract. For example, knowing who the insured is obligated to perform work for will help decide whether a blanket endorsement will suffice, or if there are any serious gaps in coverage.
When Unreasonable Requests Are Made
It’s not always feasible to adhere to the requests of an insured party. If the matter involves an uninsurable request, agents often feel conflicted in issuing the certificate. This is because they want to retain the client’s business but through the dishonest process of fraud.
Educating certificate holders and insureds that a certificate does not necessarily mean the policy complies with their requests and that supporting endorsements must be procured from the carrier to ensure the requirements are satisfied, is often the best way to avoid this issue. Insureds need to understand that additional coverage can take time to secure, and if they have enough of it, they can include the additional charge in their bid.
Sometimes, occasions arise where coverages cannot be attained, presenting a rare opportunity for the insured to renegotiate the terms of their contract.
Cancellation Notices and Policy Changes
As the language included on the COI certificate states, the insurer is not obligated to notify certificate holders of any policy cancellations. However, it is important to keep in mind that if a certificate is amended, it does not necessarily mean the policy has been adjusted in a way that reflects the change in coverage. To avoid this problem, insurers need to establish a system that ensures the proper parties will receive a notice of cancellation when applicable.
Powerful COI Tools
CTrax is a cloud-based application that was designed to eradicate the common problems associated with certificates of insurance. By acting as a virtual storage space for certificates of insurance, the CTrax platform provides instant accessibility to crucial coverage information, supporting endorsements, and contract documents.
Integrating CTrax into a business’s workflow eliminates common inefficiencies and errors that transpire from manual processes, automatically notifying its users of approaching policy renewals to ensure there is no lapse in coverage. The evolutionary system mitigates risk, streamlines workflow, and organizes certificates in a digital library that ensures all obligations are satisfied and no documentation is missing.
