Certificate of Insurance Compliance: Common Misunderstandings

COI Management | February 3, 2022

Certificate of Insurance Compliance may seem like a simple process at the surface. You ask for a COI, your contractor provides one, and you should be good to go for your next insurance claim…done! However, many organizations ask why they are still seeing rejected claims despite their certificate of insurance program.
Simply put, their compliance numbers just don’t reflect the results they are getting. Quite often, it can come down to the details and general understanding of a certificate of insurance that can make the difference. We will cover some of these misunderstandings. The important takeaway is to identify the trends for your industry and the types of coverage that you care about. 

Policy Location

Depending on the location of an insured, the name of the policy can mean an entirely different policy and hence, coverage. Understanding what types of coverage fall under the policy and at the location is critical to ensure that the data you have on hand, is not covered for something entirely different.  
Example: The most common example is the workers’ compensation policy. There are a handful of states where the information entered in the workers’ compensation box on the Acord 25 Form is not a workers’ compensation policy but an employers’ liability policy which is sometimes referred to as stop gap coverage. This is critical if you want to ensure that a contractor or vendor has the workers’ compensation policy. In this scenario, you need to request coverage from the contractor’s state fund which comes on an entirely different document.

Policy Names

Policy coverage that you want to collect can also be overlooked because of name differences. In these cases, your contractor may have the coverage, but you are not aware. 
Example: For professional services, it is common to ask for proof of a professional liability policy. Understanding that this policy can be reported on a certificate of insurance as professional liability, errors and omissions, and E&O is important.

Policy Coverage

Policy names can be very similar but have very different coverage. When this occurs, your claims department can receive a denied claim and not truly understand why coverage is being rejected. Understanding what types of coverage a policy includes is key.
Example: Garage liability typically provides coverage similar to a business auto and commercial general liability combined. This type of coverage is often confused with Garagekeepers coverage, which provides coverage for a customer’s vehicle. To add to the confusion, sometimes a Garage Liability can also be known as a Garagekeepers Legal Liability. Understanding nuances like this can be the difference when it comes to ensuring you have the correct coverage for compliance.  

Policy Limits

You may think that a limit is simply a limit. However, policies can be written with different types of limits. When it comes to compliance and making sure your contractor or vendor has enough coverage, understanding how limits can be written for various policy types is a must.
Example: The most common misunderstanding is the business auto policy. You can receive split limits, which are three different limits for varying coverage on bodily injury and property damage. You can also receive it as a combined single limit, which is only one limit for all coverage. These limits are very different. How do you know whether your contractor is meeting the limit that you require?
We see where someone may reject a policy because the limits were something they were not familiar with, but the limits provided not only met the requirement but exceeded it. Not only does this cause frustration for your contractor but can create unnecessary back and forth.   
Example: For property coverage, there is an All Risk type of coverage. In this case, the agent does not provide a dollar amount for the limit. This is because the insurance carrier will provide all coverage necessary for the property that falls under the policy, minus any policy exclusions. 

Fraudulent Certificates of Insurance

Depending on your contractor or vendor network, you can struggle with the occasional denied claim where you are informed that the contractor did not have the coverage you were provided on a COI. Come to find out, the certificate of insurance provided was not compliant, but actually fraudulent! Knowing these common misunderstandings on a certificate of insurance can help you to identify when the COI you’ve been provided is not valid. Why? Because contractors do not understand these nuances either and can enter information that is a red flag. For example, if you see both the combined and single limits for an auto policy, that should lead to a phone call with the agent for clarification. The actual coverage (or lack of) is immediately cleared up. 
Recognizing that data on a COI is not what it may appear as on the surface is vital to the process and certificate of insurance compliance. It can help you understand when coverage is missing, present, or is simply not valid. PlusOne Solutions is your compliance partner. We can help take the guesswork out of certificate of insurance compliance.
Contents are provided for information purposes only and should not be construed as legal advice. Users are reminded to seek legal counsel with respect to their obligations and use of PlusOne Solutions services.
About PlusOne Solutions
PlusOne Solutions has been an industry leader in the risk management field by specializing in compliance programs that meet the complex challenges of geographically dispersed contractors, vendors, and employee networks. PlusOne Solutions protects companies from possible financial, legal, and reputational risks associated with contractor and vendor relationships while creating safer work environments. To learn more, visit https://www.PlusOneSolutions.net.