COIs and "proof" of insurance - Part II.

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Much has been made of the limitations of certificates of insurance, the common refrain being they don't offer proof of insurance. The fact that this was never the intent of the COI document has been examined in prior discussion and need not bear repetition. But the observation does beg a larger question – what document(s) do we require in order to actually obtain that proof?

Well, like everything without an easy answer, it depends... In personal lines coverage, we carry health and auto insurance ID cards. No questions asked. Some states now even allow the information to be displayed on a smart phone. In reality, these ID cards are simply personalized versions of a certificate of insurance and bear all the same limitations. Yet they are accepted as prima facie evidence that an insurance policy has been obtained for the named Insured.

Commercial lines are a little more complicated. First, the risks can be significantly higher, so the level of due diligence should be proportional. Second, the matter of "proof," in the form of what, actually, is being insured, is much more complex. Contract and indemnification language, the possible existence of specific policy exclusions, the non-trivial complication of additional insured status and evolving case law make the commercial world a mine field ripe for argument and attorneys.

What's a risk manager to do?

It can be argued that other than the exact day on which you are obtaining your proof you can never know with ironclad certainty. (The policy could be cancelled tomorrow and you might not know, regardless of what your agreement says.) But, provided you put in the time and effort, you can get close.

Here's an ambitious laundry list:

  • Get the COI. Yes, yes, I know. But it is your reference document for everything else. It points you to the Insured's broker, the carriers, policy dates and terms and limits of coverage. It contains a wealth of information and you need to get it.
  • The Declaration Page of the insurance policy. Here you'll get a summary listing of all the parts of the insurance policy. Much of this will be found on the COI, some will not. The big difference is you're getting it from the Insured's carrier, a fact of comfort not lost on prudent risk managers.
  • The Other Insurance Clause. Now we're getting a little technical. This provision of the Insured's policy will spell out how loss will be apportioned among insurers when more than one policy covers the same loss. The risk here is that some policies provide no coverage when other insurance is in place, some pay a pro rata share, and others apply in excess. You may not know if you don't ask.
  • Applicable Endorsements. Short of getting a copy of the Insured's entire policy, the endorsements are your best proof of critical issues such as additional insured status, notice of cancellation, waiver of subrogation, primary and non-contributory and completed operations.

What is enough? The answer can only be - whatever makes you comfortable. "Proof" can be a relative term.

In general practice, the COI and the endorsements are typically collected. For smaller risks, maybe just the COI. We have seen situations where the actual policy of the Insured was required, but that is more the exception than the rule. Moreover, it is burdensome to collect and review and may lead to delays in contract inception.

Other practicalities come into play, such as the time, effort and knowledge required to assemble a suitable package of "proof" of insurance. Like everything in the risk manager's world, this is another balancing act.

The good news is that just like the establishment of insurance coverage requirements, you have the luxury of adjustment going forward, tuning your risk control practices based upon perception and necessity.

You can even have someone else do it all for you.

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