“Certifiably” Insured

By: Wayne Salen

In the three decades of my risk management career, there is notopic more discussed yet less understood than the Certificate ofInsurance. The commercial insurance industry is as confusing anindustry as there is, and if you are not a competent insuranceprofessional, most of the technical detail is simply too cumbersomeand difficult to understand. Some companies, including temporarystaffing firms, use this confusion to their advantage.

What does one need to know about Certificates of Insurance (COI)?Here are some basics as well as some lesser-known important issuesyou need to know:

•A Certificate of Insurance (COI) is not a part of an insurancepolicy, and does not amend, delete or qualify coverage. It is, inits purest form, a document that shows current coverage of thenamed insured.

•A COI cannot be relied upon as evidence of agreed coverageshould a dispute occur and a court case ensues. This aspect hasbeen decided many times in many courts throughout the U.S. It alsodoes not replace nor subordinate the insurance policy.

•A COI provides valuable information and should serve asinformation that cements the business relationship. It provides thenames of the insurance carriers providing coverage, the policydates of coverage, the policy numbers assigned by the carrier andthe limits of coverage from those policies. It also providesspecific aspects of those policies, such as type of coverage,occurrence form or claims made. In addition, it includes thespecifics of coverage, such as autos covered, and even thedeductible or retention of the particular policy noted.

•A COI does not provide the specific terms and conditions ofcoverage in the policy. This is important to customers andprospects. You need to know that COI's are generated by insurancebrokers and/or agents, most likely not by the temporary staffingcompany. As such, whoever is generating the COI is a partner to therelationship as it concerns the content of the COI. So what doesthis mean to you, the customer or prospect? My first suggestion toa business partner is to call the producer (broker/agent). If youhave a COI that does not provide the telephone and fax number ofthe producer you should be concerned. One of the oldest and mostpervasive frauds is using a COI as evidence of coverage when thereis none. So call the producer and ask, "Do you insure LaborFinders? How long have you insured them?" Transparency and trust iswhat we at Labor Finders provide our business partners. It isparamount!

•Lastly, when additional coverage or extensions of coverage arerequested, don't be miss-lead as to what that means. A typical COIthat provides something additional, let's use the additionalinsured status as an example, does not change the terms andconditions of coverage within the policy. In this case, it onlyadds the customer to the coverage afforded, but does not provideany additional coverage not included in the policy. An example ofthis is "sole negligence". If the customer is solely negligent foran occurrence (loss), the additional insured status does notprovide coverage since sole negligence of another party (any partynot a named insured) is not provided in the policy.

While there are many more examples of false assumptions thathave developed over the years with COI's, the most important issuethat you need to know is that each and every one of the COI's thatour customers or prospects receive, can be verified directly withthe producer and that transparency is for you. We do want to beyour preferred vendor and we know that by gaining your trust wewill achieve that status.

Wayne Salen
Director of Risk Management, Labor Finders International
RIMS Board of Directors; Director Audit, Standards andPractices