We want to start by saying this: less expensive subcontractors and vendors are not inherently bad. It could simply be that they choose to have lower price points strategically, or they have other reasons unbeknownst to us.
That being said, it is important to pay close attention to all of your subs and vendors and what they have regarding their insurance. Newer subs and vendors (who will probably be cheaper) are more likely to have mistakes or gaps in their coverages, but this is usually due to not knowing what they don’t know yet; that doesn’t excuse the errors, but it is all the more reason to hone in on their certificates of insurance (COIs).
Everything we’ll discuss here is applicable to all areas of insurance, but we’re going to focus on workers’ compensation.
Tracking Workers’ Comp is Hard
Worker’s compensation is a must-have coverage item for any sub or vendor whose employees enter your work areas. If you’re only tracking a few certificates of insurance (COI), doing so on a spreadsheet is probably where you need to be. Manual entry at this level isn’t necessarily a bad thing, especially when it’s this few, but there are still pitfalls awaiting.
Here are some things you definitely want to keep your eyes peeled for in that process.
Manually Entering Data Leaves the Possibility of Human Error Wide Open
Be diligent in training your staff (if you aren’t the one entering the COI data into your spreadsheet) to double, nay, triple-check their inputs. Something as simple as an error on a COI could mean your neck is on the line, not your subs’ and vendors’. It can seem like a game of “Gotcha,” because no insurer wants to pay out on claims, so make sure your hiney is covered. This is a great time to verify they have the coverage you require to be on your work site. Policy limits and expiration dates can come back to haunt you in a big way.
Human error can be hard to combat. The more COIs you have to track, the more opportunity exists for small errors to compound. You have to be on your a-game all the time.
COIs, or More Accurately the Coverage Discussed Therein, Expire
Policies expire every day. The COIs you’re tracking will have those expiration dates on them. You need to track these dates in order to stay on top of your subs and vendors. If something happens past that date and they haven’t renewed their coverage, your liability goes up tremendously. In theory, it’s their responsibility to keep you abreast of these changes, but that’s not always how it works.
Sorting your subs’ and vendors’ policy expiration dates is easy on a spreadsheet as long as you have them in their own columns. If you’re tracking a lot of COIs, therefore a lot of expiration dates, this gets exponentially harder, but there’s a little secret (more on that a little later).
Fraud
It happens. Even the most seasoned are susceptible to it. How do you know if something is fraudulent? You might not like this, but the only real way to do it is to verify from the source. That usually means calling the insurance agent. Again, if you’re only tracking a few COIs, this isn’t that bad to do. While you have them on the phone, verify expiration dates and coverages.
COI forms are free to download on the internet. This makes fraud easy, but with a little knowledge, you can be armed against it. A healthy dose of skepticism is valuable in most things — insurance is no different. Be super critical. If something looks off, point it out, get clarification, or go straight to the agent. In some cases, just bringing up that you need to talk to their agent is enough to get them to come clean.
Verify That Your Company is Named an “Additional Insured” on the COI
If you aren’t and an accident happens, you’re liable for the costs of the claim, including any workers’ comp that may need to be paid out. It isn’t just limited to workers’ comp, though. Insurance on job sites is an upstream game; it’s the companies’ under your responsibility to make sure you are covered.
Essentially, your obligation is one of oversight and safety. If you aren’t named as additionally insured, all the financial responsibility will most likely be on your shoulders.
If the Fields are Hand-Written, That’s a Huge Red Flag
Call the provider/agent right away. It may be legit…but it probably isn’t. Standard COI forms are easily downloaded from the internet and can be faked. Most legit certificates are going to lack any sort of handwriting on them.
It may seem like a lot of work (depending on how many COIs you’re tracking, it is), but it’s work that could save you a lot of headache in the long run. Make sure you, or someone on your team, is maintaining your COI spreadsheet as coverages age out, update, and change. If you don’t, you could be up a creek. No one wants to go up that creek, we assure you of that.
Key Takeaways
Reliable, experienced contractors know how the insurance realm works, and for the most part, they have all of their coverages and COIs in place. If they’ve been doing it long enough, they know to build their insurance costs into the fees they charge as a part of doing business. This doesn’t mean you shouldn’t do your due diligence to make sure they are in line with what you know is needed. Ultimately, it’s your neck on the line. Cheaper help can mean more headache if you aren’t careful.
It’s important to know that the more vendors and subcontractors you work with, the more interface you’re going to have with different insurances; it can get complicated just to know if you’re in the clear regarding compliance. Workers’ compensation continues to be one area where, if not caught in time, upstream costs can really hurt your business.
That’s Why You Need the Right Partner as You Begin to Scale
At some point, managing your certificates of insurance for subcontractors becomes too much even if you have someone solely dedicated to it on your staff. myCOI’s software automates all of this for you. It scans your COIs for issues with compliance, waivers of subrogation, coverages, expiration dates, additional insured endorsements, and a TON more. You even have the opportunity to have an insurance professional lay an extra set of eyes on anything you need to make sure all is on the up and up. We think it’s just the right thing to do!
As an added value, we also offer (via our concierge plan) 90-day verification on every COI we manage for you — this keeps you safe and validates the coverage of your subs and vendors so everyone can keep working knowing everything will be taken care of should something awful happen.
Find out why we say “We Erase the Worry” — schedule your demo today!