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Certificate of insurance management - pulling it all together

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Whether you're leasing property, hiring a contractor or signing on a new vendor, there are basically three "insurance" components that come into play:

  1. The Contract: Most contracts contain insurance provisions. Usually the insurance provisions are clearly identified in the contract and the insurance language should be familiar to the non-insurance professional.
  2. The Certificate of Insurance: Contained in the insurance provisions of the contract, at least one party is typically responsible for providing a "Certificate of Insurance" or COI. A COI is the "common currency" recognized and accepted by most businesses. The absence of a properly executed COI will often stall a new lease, construction project or refinancing arrangement.
  3. The Insurance Coverage: Often overlooked, the insurance coverage shown on the COI may be misrepresented. While usually not intentional, the landlord, project manager or manufacturer typically does not request the actual insurance policies or endorsements. When the insurance policies are reviewed (typically after an incident or claim), over 70% of the insurance policy terms and conditions do not match those outlined in the COI or called for in the contract.

Depending on whom you ask, whether the attorney who drafted the contract or the insurance broker reviewing the contract against your insurance requirements, each will have a different answer as to who is responsible for making sure you are properly protected in the event of an incident or claim.

The short answer is "you." Relying solely on an attorney or insurance professional to properly manage this process is dangerous. An effective COI management plan should include "you", your insurance broker and your attorney working together to make sure your organization is properly assuming or transferring risk. Whether your organization has a COI management plan or not, a couple of key ingredients in forming one are as follows:

  • A thorough review of all existing COI's by your insurance broker to make sure all coverage terms and conditions are properly "represented."
  • A careful review of your tenants', contractors' or vendors' insurance policies against the insurance provisions called for in your contracts.

Lastly, heed the following...

A Certificate of Insurance is NOT an Insurance policy, and does not serve to provide, endorse, amend or alter in any way the terms of an insurance policy. Only an endorsement or rider of amendment to the policy can effect changes in coverage. Reference to a contract between the client and a third party on a certificate does not provide coverage.

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