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The Certificate of Insurance (COI) loosely stated is the Business equivalent of an Auto Insurance Id Card – it illustrates proof of Insurance to parities that require it. Common examples, Landlords, General Contractors, Vendors, Municipalities and knowledgeable Homeowners. It is required, because the entity or person is essentially stating, "We will not hire you (or buy from you or lease to you or allow you to work - whatever the business relationship may be) if you are not Insured."

It is important to remember that the COI is to mirror the Insured’s policy. If the COI is not correct it does not constitute coverage. Using a simple example, if an Insured errantly receives a COI that illustrates a $2,000,0000 each occurrence limit but their policy specifically states it is only a $1,000,000 limit – The COI is incorrect – there is only a $1,000,000 limit. 

Now, why do I mention this, the example above if fairly obvious - however, the issue is typically relevant when the requesting party is requiring specific wording on the COI. You send your COI and they decline stating, "It has to read EXACTLY as stated in the Description of Operations Box or you can’t work for us."   Since that exact wording is not contained in the policy, the COI can not include the wording.  

Resolution is fairly simple. If you hire (or have hired) an Outstanding Insurance Agent (hands removing from keyboard, thumbs pointing unabashedly at self), you turn it over to them. They will dissect the wording of the Construction (or Lease or Vender etc.) contract and proceed to educate the requesting party and illustrate proof of compliance with your correctly endorsed (or pursue the appropriate endorsements) Policy. Problem Solved – new contract secured – more money in the bank!! 

What to watch out for – same scenario as above except this time the agent or CSR – just modifies the wording of the COI and shoots it back to the requesting party. Instead of reading the requesting parties contractual requirements they have printed  incorrect information on your COI. Not a big deal, unless there is a claim! Now the claim occurs and your COI indicates you have an endorsement that is not included on your policy – this endorsement is crucial to protect you from this particular type of claim (e.g. an elaborate Additional Insured requirement). Now the entity is suing the Insured with no protection from the Insurance Company. Unlike above, now – problem created – lawsuit – money leaving bank.

 

I’ve exhausted myself! If you have stayed with this post this long – I thank you! The takeaway: If you have prospective clients that are making an unknowingly (they are typically just working with instructions that their Company’s attorney advised them) unreasonable COI request of you,  and we do not work for you (since our clients already know the drill) I’d highly recommend the "Email" option, under the Share drop down below. It should provide a measure clarity for your prospective clients.  



posted by Dan Hebbeln: dan@hebbeln-ins.com

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Hebbeln Insurance
744 Spirit of St Louis Blvd, Suite H
Chesterfield, MO 63005
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