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Insurance policy endorsements are a COI's best friend

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In the world of service providers who track and manage certificates of insurance on behalf of others, it is commonly held that more than 70% of COIs do not meet the insurance coverage requirements stipulated in the contract. Yet in a study by the American Risk Management Resources Network, it was determined that with certain classes of vendors the non-compliance rate was closer to 90%.

Moreover, despite the imposition by many states of tough new laws and regulations aimed to protect against certificate of insurance malfeasance, the incidence of misrepresentation of information on COIs continues to be a problem for the industry.

If there was ever an argument made for the validity of verifying insurance compliance, there it is. And one of the best strategies employed is to request one or more insurance policy endorsements be provided along with the COI.

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 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. 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. If you have those three pieces there's a pretty good chance you're looking at a part of the Insured's actual insurance policy.

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.

Nevertheless, in a world increasingly suspect of everything we read and hear, eliminating "fake" from insurance verification is a worthy effort in the risk manager's efforts to obtain true and binding risk transfer, and endorsements can play a central role in overcoming the challenge.

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