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Certificates Book
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Hello, my name is Jonathan Morgan . I
have been in the insurance industry for many years as an insurance
broker serving the needs of Contractors.
This book is intended to be a guide to Certificates of Insurance,
whether you are giving a certificate to a government agency, general
contractor, homeowner or you are receiving a certificate from
a general contractor or sub-contractor.
On the back inside cover you will find a Certificate of Insurance
completely filled out. Please use this certificate as a basis
of reference as we go through this book.
I made every effort to keep things simple and try not to use too
many insurance words, but insurance wording cannot be completely
ignored.
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Over the years I have seen three
attitudes towards certificates of insurance.
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- The contractor understands the importance of the certificate
and takes great care in making sure it is handled correctly and
has a "system" in his office that monitors the certificates.
The contractor understands the importance of the certificate but
is too busy to make sure it is done and hands the duties over
to someone else in the office that is not trained to properly
handle the job.
- WARNING! Most people don't know this! Comp policies have a
3-year "Look Back Window." Your company can look into
your records dating 3-years back and conduct an audit. This is
not uncommon. I have personally seen it happen.
- The contractor does not understand the importance of the certificate
and does nothing.
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Here are a few examples of
how certificates can cost you money.
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| At the end of your policy period,
your insurance company has the right to audit your books. When the
auditor comes in to look at your books he is trained to look for sub-contracted
work. Since sub-contracted work is an expense to your company, it
is very easy to find. He will then look for the certificate of insurance
that corresponds to the work subbed out. If you cannot produce the
certificate he will add the amount of sub-contracted work to your
payroll, or gross receipts, in either case you will owe the insurance
company an additional amount for your general liability insurance.
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This can add
substantial amounts owed to the insurance company .
This is an extra expense you did not plan on.
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Successful contractors take the cost of insurance into account
when bidding jobs. If you are audited and have to pay an additional
amount to an insurance company, your cost of insurance has gone
up and the "extra" is not in your bids. The result: You
did not make as much money as you thought you did, or you lost more
money than you thought you did!
Either way it is a lose-lose situation.
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| In the event
of a claim there are two ways to lose additional money.
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If you do not get a certificate of insurance from a sub that does
not have coverage and your policy does not cover subs, the cost
of this claim will be directly out
of your pocket!
If your sub does not have coverage and your policy does then the claim
will go against you.
When you purchase insurance for the coming years, that claim will
show against your record, since your cost of insurance is partly based
on your claims history, your insurance will go up. |
| Certificates
of insurance are not to be taken lightly! |
| LINE
BY LINE |
| Now we are going to go through each
line of the certificate of insurance so you will have an understanding
of what all of this means. I have broken down the certificate into
14 parts. Click below to open a copy
of the certificate form so that you may refer to it as me
continue our discussion. |
| View the Acord Certificate of Insurance
Form |
| Acord
Certificate of Insurance Item by Item |
| Attachments
to the Certificate of Insurance |
| Everything we have talked about up
to this point are part of the Acord Certificate of Liability Insurance
form. Now let's talk about additional form(s) that must be attached
to the Certificate form (if they apply). |
|
Acceptance
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| Many governmental agencies, cities,
general contractors and more and more, smart homeowners will ask to
be additionally insured. |
| What
is an Additional Insured Endorsement? |
| The primary reason for additional
insured endorsements is defense coverage; another reason is to insulate
your loss experience by making it unnecessary to make a claim under
your own liability policy. |
| Here
is an example: |
| A general contractor hires an electrical
contractor and asks the electrical contractor to name the general
contractor as an additional insured on the electrician's liability
policy. |
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Let's stop right here...
Click below to view both the Additional insured form CG
20 10 11 85 and the CG 20 10 10 93:
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View the CG 20 10 11 85
Attachment
View the CG 20 10 10 93 Attachment
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| Find
the statement: |
| "WHO
IS AN INSURED is amended to include as an insured the person or organization
shown in the Schedule, but only with respect to liability arising
out of "your work" for that insured by or for you."
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What that means is the electrical contractor is adding the general
contractor as an additional insured to his policy, giving the general
contractor the right to turn in a claim against the electrical contractors
policy for liability arising out of the work of the electrical contractor.
This way the general contractor does not have to turn the claim
into his liability insurance company. He is protecting himself from
errors made by the electrical contractor.
Any time you hire a sub-contractor you should ask to be named as additional
insured on his policy to protect yourself from errors of the sub.
If a claim occurs down the road, the sub-contractors insurance company
must provide a defense on your behalf and you do not have to turn
the claim into your insurance company, saving your loss experience,
thus saving you money down the road. The same goes if you are
a sub who hires a sub. |
| There
are many additional insured endorsement forms, the two most popular
for contractors are: |
CG 20 10 11 85 (you may view above
by clicking on the appropriate link.)
CG 20 10 10 93 (you may view above by clicking on the appropriate
link.) |
| If you
read both forms carefully you will find that there are only a few
words that are different. |
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CG 20 10 11 85—The last line says with respect to liability arising
out of "your work" for that insured by or for you.
CG 20 10 10 93—The last lime say with respect to liability arising
out of your ongoing operations performed for that insured.
The second one (CG 20 10 10 93) implies that you must be working
on the project at the time of the claim. This form is restrictive
and should be avoided.
In summary, When hiring sub contractors you must be very careful
to get the right insurance certificates from the sub and make sure
that you are named as additional insured on his policy. Be sure
to ask for the CG 20 10 11 85 , and do not settle
for the form with
the more restrictive wording.
The CG 20 10 11 85 usually will cost the sub
an additional charge. Some companies include the endorsements
at no additional charge but build the extra charge into the policy
itself. Other companies will charge as little as $30 to a high of
$500.
Many insurance agencies will put the following wording in the descriptions
of the operations portion of the certificate only. That is not good
enough, the Additional insured endorsement filled out completely with
your company name must be a separate form (shown on the following
page) and attached to the certificate. |
| What
is a Primary Endorsement? |
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Along with the above Additional Insured Endorsement, many people
are asking for primary endorsements .
Ninety-nine percent of all insurance companies have an additional
charge for these as well, mostly from $30- $250 each.
Primary insurance wording is issued in conjunction with additional
insured endorsements. |
| Stop
here and go read the Primary Endorsement wording. |
| Click Here to View the
Primary Endorsement Now! |
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Using our general contractor and electrician example above. The
general contractor wants to be sure that regardless of what insurance
he (the general contractor) has the electricians insurance company
is first (primary) on any claim.
It also goes on to state that the liability is determined to be solely
the negligence or responsibility of the electrician. |
Greenmor's
Certificate of Insurance
Checklist & Verification Procedures |
| I know I have been throwing all this
information at you and now its time to sort it out. The first thing
you must do is to set a standard set of insurance requirements that
all sub contractors must meet in order to work for you. |
| Step
by Step |
Step
#1
ESTABLISH SUB-CONTRACTOR INSURANCE REQUIREMENTS
What insurance requirements are you going to ask of your
subs?
The certificate of insurance on the inside back cover of this book
is a good example of insurance limits that most general contractors
require. (Except for the umbrella option). Look it over, adopt this
as your requirement or make changes. Remember to require your subs
to name you as additional insured and primary.
Remember that these requirements are yours. Asking for these limits
and endorsements allow you to protect your biggest asset. YOUR BUSINESS.
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Step
#2
WHO'S IN CHARGE
Someone in your office must be in charge of certificates
of insurance. Depending on the size of your operation, it can be the
owner or a person designated by the owner to handle the job. It has
been my experience that contractors like to build things, they do
not like to handle paperwork. If you are a one-man operation, make
this a priority, or nicely ask your spouse to do this job. (After,
you both sit down and read this book)
If you have employees, designate someone to do the job. (After,
you both sit down and read this book)
P.S. Another good reason for the owner not to handle
the certificates is that certificates need to be verified. To verify
a certificate you need to make a phone call. An office person is better
suited for this job than an owner who is in the field.
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Step
#3
NO EXCEPTIONS
DO NOT MAKE EXCEPTIONS FOR ANYONE...
Not your brother, uncle, father, best friend since high school, current
girlfriend or boyfriend, good buddy who is down on his luck right
now, NOBODY... |
Step
#4
NOBODY STEPS ON JOBSITE WITHOUT A CERTIFICATE
NOBODY goes on the jobsite until you have received
his or her certificate of insurance and it has been checked and verified.
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Step
#5
TELL THE SUB-CONTRACTORS YOUR REQUIREMENTS
IN ADVANCE
When you send out your specs for the subs to bid,
include a copy of the certificate of insurance (with your requirements
typed in) and the additional insured endorsement(s) and primary endorsement
you require in order for them to bid on your project.
Starting on the next page I have put an example of an insurance
packet you can include with the job specs.
Use my sample packet or devise your own.
A good time to get your certificates of insurance file in good order
is when you are not busy, you know, when you are between jobs. This
way when your jobs start you will be ready and you will not hire subs
and have to wait until they get their certificates in to you. You
will already have them on file and ready to go.
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(Place this on your
company letterhead)
Make sure you attach a copy of the CG 20 10 11
85 and
Primary Endorsement to the above letter when you send it.
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Step
#6
USE THE CHECKLIST
Now we have a copy of the sub-contractors certificate
of insurance, additional insured endorsement, and a primary endorsement
on our desk. Using the checklist, go through each section of the certificate
and see if anything is missing, misspelled or the dates are wrong.
If there are errors Call the insurance agency who gave you the certificate
and ask them to make the corrections and fax a new one back to you.
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Step
#7
THE EXTRA STEP — EXCLUSIONS
This is the area that can cause a problem
and the only way to find out in advance is to ask . For
example; in California, 98% of insurance companies exclude Condo's,
Townhouses and Apartments. If you were building one of these projects,
you should call the insurance agency and ask a very simple question.
Call the agency and ask the agent or customer service person handling
the sub-contractors account are there any exclusions on the policy
regarding Condo's, Townhouses and Apartments? If the answer is yes,
the certificate you are holding is worthless.
If the answer is no, then kindly ask the person to send you a short
note stating there are no exclusions for Condo's, Townhouses and
Apartments.
Each state is different; there may be areas of construction in
your state that are a problem. You know what they are, and if you
don't, call and ask your broker.
If you are hiring a concrete contractor for house pads, a good
question to ask is, are there any exclusions on the concrete contractors
regarding house pads?
If you are hiring a landscaper who is going to use chemicals, call
and ask regarding the use of chemicals.
If you a hiring a grading or excavation contractor, ask about exclusions
regarding earth movement.
Look at my list of exclusions and look at your own policy for exclusions
to formulate your questions.
I realize this is more work, but the
question is do you want to know about
these potential problems before or after the claim.
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| Indiana Contractors's Insurance
Certificate of Insurance checklist |
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Subcontractor Name:
_________________Trade: _______ Lic. #: _______
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_____ Contract signed
_____ Certificate received
_____ Company's are A rated
_____ General liability section |
Occurrence box marked
General liability limits $1,000,000
General Liability expiration date current |
| _____
Auto Section |
Auto Liability limits $1,000,000
Any auto or all owned or scheduled auto marked
Non owned auto checked marked
Auto expiration date current |
| _____ Excess liability Section
(optional) |
Excess liability expiration date current
Excess limits correct |
| _____ Workers Compensation
Section |
Proprietor/partners/executive officers
Included/Excluded
Workers compensation expiration date current
Workers compensation limits $1,000,000 |
| _____ Description of operations
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Certificate holder is named as additional
insured
Location of job specified |
| _____ Certificate holder
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Is your company name spelled correctly
Is endeavor to crossed out?
10 or 30 days notice of cancellation |
| _____ Signature
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| Is certificate signed |
| _____ Additional Insured Endorsement
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Is additional insured endorsement
attached
Is your name typed on the additional insured endorsement
Is the policy number typed on the additional insured endorsement
Name of person or organization typed in |
| _____ Primary Endorsement
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Is primary endorsement attached
Policy number typed in.
Name of person or organization typed in. |
| _____ Verification
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| Called to verify exclusions |
| Verification performed by:
____________________ Date: _________ |
| ORGANIZATIONAL
SUGGESTIONS |
- • Buy a three ring binder; Label the Binder SUB-CONTRACTOR
INFORMATION .
- • Three hole punch the Certificate of Insurance,
Additional Insured Endorsement and the Primary Endorsement and
put them in the Binder. It is much easier to keep track of things
this way instead of putting the information in a file and filing
it away.
- • Have a packet of your company's certificate requirements
already made up in advance so you can quickly send it out.
You must have a way of keeping track of the expiration dates of the
sub-contractors insurance. Remember, when you get a certificate of
insurance, all the subs insurance policies may not expire on the same
day. The General Liability may expire in March, the auto may expire
in July and the work comp may expire in October. |
| There
are many ways of doing this, depending on how may subs you use. A
wall or desk calendar, computer system, appointment book, etc. Pick
the best one for you. |
| Final
thoughts... |
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Over the years, my customers have asked me, What do I look for
on the Certificates of Insurance?
I finally sat down and wrote it all out. If you have a question regarding
anything in this Guide or have something to add, please give me a
call, I am always looking for new material. |
| Jonathan Morgan
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