Insurance endorsements - one more piece of the COI puzzle

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The choice of documentation available to the risk manager to ascertain insurance coverage represented by contractors, vendors or tenants (the Insured) is considerable. It can range from requesting a certificate of insurance to collection of the actual insurance policy of the Insured. The nature of the risk is usually the driver of how much material is needed to provide a satisfactory comfort level.

And, of course, the more that is requested of the Insured the more time and effort are expended in the collection and verification of the coverage required in the contract. So, once again, we find the risk manager seeking a balance between too much and too little. A common middle road, particularly in activities related to contractors, is to request one or more insurance policy endorsements be provided along with the certificate of insurance.

An insurance endorsement is a document that is part of the insurance policy. It is an amendment or addition to the policy that changes, in some way, the terms or scope of the original policy. Endorsements are used to add, delete, exclude or alter coverage.

The value of endorsements to the risk manager is that they originate from within the Insured's actual insurance policy. In other words, they come from the insurance carrier supplying coverage to the Insured. They are strong supplemental evidence that representations contained on the certificate of insurance (usually provided by the insurance broker of the Insured) are actually true.

Endorsements spell out the exact terms and conditions under which certain elements of the insurance coverage are provided. This is important as there can be multiple types of endorsements related to the same topic, such as Additional Insured status. Each endorsement version contains sometimes subtle changes that can make all the difference between being adequately protected or not.

Endorsements can be divided into several categories – standard, non-standard, and manuscript:

  • Standard endorsements are issued by an insurance service organization such as ISO. Their benefit is that they are readily available and have usually been tested in court.
  • Non-standard endorsements are those created by insurance carriers. These are usually variations of the standard endorsement but are sometimes written for a particular purpose.
  • Manuscript endorsements are those written by the carrier for a specific Insured. They are designed to be used on a single policy.

Endorsements can be complicated and require the reader to know what to look for, both in their wording and in the manner the endorsement has been supplied. Apart from knowing exactly what version you require, be sure to look for the following printed on the endorsement:

  1. The name of the Insured,
  2. The policy number associated with the endorsement, and
  3. The dates of insurance coverage.

These three pieces of information are often missing from endorsements submitted for approval. As it is very easy to print out blank endorsement forms directly from the internet it is critical the examiner verify that the endorsement is genuine – it must be tied to the name of the Insured and the policy number indicated on the certificate of insurance, and it must be verified that the endorsement dates are current.

Although not bulletproof, the judicious use of endorsements as further evidence of insurance can be a valuable tool to better manage risk. Be sure to use them wisely to prevent yourself from becoming entangled in debates about excessively broad insurance coverage documentation requests. Document overkill can also lead to challenges in obtaining compliance from your Insureds, which can further lead to potential project delays or other problems.

In addition, talking to your peers to better understand what best-practices looks like for a particular risk category is a valuable way to gain perspective on proper use of this important risk management tool.

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Endorsement altering any already approved coverage in any way needs to be signed off on by the named Insured. If Certificates of Insurance are misconstrued in any shape or form, intended or not, to mislead or harm the named insured, vendor/sub contractor, or the insurance company in any way, the person or organization/agent issuing such is open to E&O payout. If the insurance company gives authority to issue certs to agents, they to can be brought into the fray if for nothing else but litigation costs internally as well as that which is proffered/demanded by the courts. If it is proven that the insurance company did not wholly conduct due diligence in signing up the agent, then the company is considered a wrongdoer as well. Always make sure the agent has E&O cover to at least match any self insured retention and/or deductible plus the limits in the insureds policy and / or excess/umbrella policy. Also check the Contractual and or Blanket Contractual coverer for limits an language snafus.