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Certificates of Insurance and "compliance" - Part III.

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Following further with our discussion of what certificates of insurance actually are - and are not - the next misconception to dispel is the view of some that a certificate of insurance is somehow proof of compliance. The leap of faith here is that the mere existence of a COI has anything to do compliance. It does not – at least not by itself.

The problem starts with language. "Compliance" is the end result of successfully meeting a set of conditions. It is a state of being that conforms to a specified list of criteria. To aspire to it, you first must know what constitutes it; in other words, what are the rules of the game?

With respect to insurance, the compliance "rules" are derived in various ways. A written legal document, such as a contract or a commercial lease, will often contain a section spelling out the exact insurance requirements being asked of the Insured. This is the most direct, unambiguous way to obtain the necessary information.

Absent such a document, the risk manager will need to establish a set of rules that can be applied to the individual Insured. This process is inherently subjective and is dependent on the knowledge and experience of the risk manager to reasonably determine the perceived level of risk of each Insured. This can be tricky; there are no hard and fast guidelines here.

Regardless of the method, the goal is to create a set of required conditions that can then be compared against information submitted by the Insured. Unless this piece is in place, compliance cannot be determined.

It is only after the establishment of a set of rules that the certificate of insurance and other supporting documentation can come into play. One without the other is meaningless. Comparing the submitted information against the existence of pre-determined insurance coverage requirements established for each Insured is the only way compliance can be evaluated.

So, first things first. Unfortunately, without some rules in place, all the other information in the world will not tell you what you need to know.

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So many issues concerning the COI and what sources to use to achieve \"compliance\" with the contract insurance requirements. A suggested starting point is (1) the Acord COI with the AI and WOS columns checked, then better (2) the COI plus AI and WOS endorsements and copy of Other Insurance clause, then better still (3) policy copy. This listing reflects in order what is the easiest to most difficult to obtain. Keep in mind that any of the three only give you a snapshot in time, so the question really becomes which level of documentation do you want to spend the most time and energy in obtaining? If you get the policy, do you have the time, energy and knowledge to review each policy for compliance?
You can always obtain a certified policy copy through discovery request, where at this point you likely are in a legal dispute with the counter-party (which may include contract breach claim for non-compliance with the insurance requirements).
This topic can lead you in many different directions. It is really up to the individual company and risk manager to determine how to best balance risk and how to remedy COI compliance. There is no \"one way is best\" solution.