Ten things NOT to Do When Tracking Certificates of Insurance

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This column has been strong on advice about best-practices when tracking Certificates of Insurance, yet every time we add a new client I am reminded of all the things that caused them to give up. Here, in descending order of magnitude, are the reasons businesses struggle in protecting themselves from unnecessary third-party liability:

  1. No COIs. As crazy as this sounds, the number one reason people get into trouble is they don’t even begin with the basics. Even if you do nothing else, get a COI from your tenant, vendor, supplier, etc. (the “Insured”). In that way you are at least telling them it’s on your mind and you want proof of coverage.
  2. No written contracts. If you don’t have the agreement with the Insured in writing there’s a pretty good chance the topic of insurance requirements hasn’t even been addressed.
  3. No risk classifications. Not all risks are created equally. The guy working on your roof is probably at greater risk than the locksmith. So, categorize risks and assign appropriate levels of insurance coverage to each.
  4. No evaluation. It’s great to have the COI and a written contract. But if you don’t compare the two you have no idea if the Insured is in compliance with the terms of the agreement.
  5. No follow up. You must act on the outcome of your evaluation. If the Insured doesn’t have adequate coverage demand the deficiency be corrected. Put it in writing. Don’t let the contractor start the job until the problem has been resolved. Don’t give your new tenant the keys. You have the leverage, so use it.
  6. No renewal COI. All things must end, even insurance policies. But the tenant is still in your space, the vendor is still coming on your property. Ask for a renewal COI before the old one expires. The goal is to maintain continuity of risk transfer.
  7. Bad data. Vendors and tenants come and go, of course. You must stay on top of an ever-changing list. If you don’t know who to ask you are doomed from the start.
  8. No system. There are a lot of moving parts in tracking COIs. Spreadsheets don’t do the trick. Neither do Pendaflex folders and three-ring binders. Get the right tools for the job.
  9. No ownership. Someone dedicated to the task must be in charge. Responsibility for risk transfer is important and can have a damaging financial impact on the business. Take it seriously, budget for it and make sure you have the right person in the right seat.
  10. No metrics. Measure your compliance progress. There are a handful of key performance indicators that can ease your way to higher rates of compliance. Identify them, track them and you’ll know where to focus your efforts.

Lastly, the person(s) who tracks your COIs must have a good understanding of insurance and all its associated rules and considerations. That person must know what to look for, what questions to ask and must possess the mental discipline and tenacity to do the job properly. Be honest about your own capabilities. There’s no shame in asking for help.

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