Keep a careful eye on county certificates of insurance

By Michael Kelly
Property & Casualty Program Specialist

Simply stated, a certificate of insurance is a document issued by an insurance company or its agent that provides a very brief description of an entity's insurance coverage. It normally is requested from an entity or company that is providing some type of product or performing some type of service for your county.

The information provided should include at a minimum the policy coverage limits, inception and expiration dates, as well as the specific insurance company name for each line of insurance listed. It will state the certificate holder's name and address, the agent for the insurance company, as well as who is the actual insured party.

The certificate verifies at the time it was issued that a certain insurance policy has in fact been issued and is in effect for that point in time. To ensure its validity, the certificate should be signed by an officer of the insurance company or its agent.

While there are many proprietary certificate of insurance forms in the marketplace, the generally considered standard is the "Acord Certificate of Insurance Form #25." It is widely used by "for-profit" insurance carriers and their agents. Using a standard form decreases the likelihood of an error or misinterpretation of coverage.

A certificate of insurance is not a complete explanation or description of all the coverage listed. The certificate will in fact often state that the insurance afforded by the policies described is subject to all the terms, exclusions and conditions of such policies. The certificate form often will stipulate any aggregate liability limits shown may have been reduced by paid claims earlier in the policy term to other claimants. On the Acord form, there are two blocks that can be checked that clarify how any liability aggregates are to be applied, being either by project or by location. For county construction projects this is an important point to consider.

Pay close attention to any special provisions, description of operations, or limiting coverage language that is added by the insurance company or its agent. Note any disclaimer, additional insured or subrogation waiver specifics and verify that these are in concert with county expectations.

This is where a certificate holder can often get into trouble without their knowledge. Any exclusions or limiting provisions found within the policies will apply and dictate the availability of coverage. The certificate of insurance is not intended to constitute a contract and does not transfer risk or amend any insurance policy language. It instead states in greatly abbreviated terms the basic policy coverage, limits and effective dates.

So how does a county manager, risk manager or finance officer know in fact their interests are being protected and they are getting accurate information? The short answer is, when possible deal with experienced professionals that you know, and ask questions if something does not make sense.

From a coverage standpoint, an insurance company will not intentionally be obscure or unclear in chosen language on their certificates; it is in their best interest to be as transparent as possible. When in question, do what you can to verify – even to the point of requesting actual policy endorsements – and take the time to carefully read each certificate of insurance. You will catch 95 percent of the traditionally made errors.

Misspellings, typographical mistakes and other similar errors never matter until something potentially catastrophic happens – then it likely will matter. If possible, appoint an individual to be responsible for reviewing any and all received certificates of insurance so that over time that individual will become experienced with all the possible variations in the certificate of insurance forms and know the usual vendors utilized by your county. With a little help, this can be performed by an individual with limited or no risk management experience. Emphasizing the importance of this review function to the individual will go a long way to keeping your county out of trouble.

Remember, "for-profit" insurance companies are in the business to make money. If it is potentially more cost-effective to litigate the question of available coverage than it is to step up and pay, some will opt for the least expensive route with little or no hesitation.

Like it or not, the devil is in the details, but with careful diligence and common sense, ensuring the accuracy of your certificates of insurance does not have to be like navigating a mine field.