By Jeff Forbes

The certificate of insurance is one of the most misunderstood documents in business.

Originally meant to serve as evidence that insurance was in place, owners and general contractors have often sought to make it a contract of insurance itself.  

The number of modifications that were requested actually caused state insurance departments, regulators and sometimes legislators to limit what modifications were permitted on a certificate. 

It Starts with the Contract

It all starts with a contract, MSA or agreement for work to be performed. These documents will contain insurance requirements. Insurance requirements have become more and more onerous for integrators, expanding in a seemingly endless process.  

Customers try to transfer as much risk as possible and make someone else pay. By transferring the risk, they reduce their losses and future premiums. 

Owners and general contractors often demand aggressive indemnification provisions and seek policy language and amendments that go beyond the standard general liability or professional liability insurance policy; sometimes they attempt to require provisions that simply aren’t available in the insurance marketplace.  

On top of this, many companies have demanded higher and higher limits. 

Endorsements

Endorsements to the standard commercial general liability policy form can modify the policy by expanding, limiting or even eliminating certain coverages. Courts can also affect the policy by the way it interprets the language of the insurance contract.  

Insurance carriers and general contractors stay up to date on the latest coverage decisions and update their policies and insurance requirements whenever a coverage interpretation disadvantages them. 

Owners and GCs complicate this process even further by requiring loads of additional information on the certificate of insurance. A certificate of insurance used to be a simple and straightforward document.  

A case in point is the new trend toward cross suits endorsements. The standard policy does not contain a cross suits provision, but many insurance carriers will place an endorsement on the policy eliminating coverage for suits between insureds.  

As a result of a recent decision in Massachusetts, we see contracts stipulating the absence of a cross suits endorsement. Contractors then want this language placed on the certificate and will sometimes even request a list of policy forms and endorsements to prove the absence of the cross suits endorsement.

Certificate Monitoring Systems

To manage the process, certificate monitoring systems have crept into the process resulting in headaches and delays over misreading, misinterpretation, etc. of the certificate. The process is intimidating.  

Many certificate monitors use a system that gives you an F if certificates don’t comply. Many of those conducting the review lack industry-specific knowledge and are simply following a checklist, so anything out of the ordinary can cause problems, delay or unwarranted rejections. 

At the time of this writing, Jeff Forbes was a blog contributor specializing in risk, legislation, regulations and casualty topics for ECBM, an insurance broker that partners with CSIA to provide CSIA members with a resource that understands the unique needs of a system integrator.  

This article was originally published in the April 2021 CSIA Newsletter. 

Photo credit: Awesome Content/PICWIZARD