We know how demanding your job can be, and often times finding the time to review endorsements to ensure your vendor’s insurance agency has done their job appropriately can be yet another task that falls to the wayside. With so many other priorities on your plate, collecting and reviewing your vendor’s additional insured and waiver of subrogation endorsements can feel like another burden. But nonetheless, it is very important that you collect and review the COI and endorsements so you don’t run the risk of your vendor’s agent providing something that’s inaccurate.
Risks of Relying Only on the Certificate of Insurance (COI)
A 2013 article published by Independent Insurance Agents & Brokers of America, Inc. entitled, “E&O Risk Management: Meeting The Challenge Of Change,” explains the following staggering statistics:
“The City of Atlanta did a survey of certificate activity involving contractors and vendors who did work for the city. They found that 20% of certificates indicated policies that didn’t exist and 50% indicated additional insured (AI) endorsements that had not been ordered or delivered. Of certificates that indicated cancellation notice would be provided, 75% had no such right of notice endorsed onto the policy.”
“An agency management consultant did an agency file review and likewise discovered that 20% of certificates showed policies that didn’t exist and 42% showed additional insured endorsements that were never ordered.”
“A Florida agency conducted its own internal review of 10-11 months of certificate activity and found a 90% error ratio, with 40% of certificates having errors so significant that they posed an E&O threat.”
The IIABA article also gives several examples of real-life certificate and additional insured E&O claims:
- The certificate showed that additional insured coverage was provided under a blanket additional insured endorsement. However, there was no contractual requirement for AI status as needed to trigger coverage under the endorsement. Settlement: $445,000.
- An agency CSR failed to order an additional insured endorsement after issuing the certificate. Settlement: $180,000.
- An agency issued 4,000 certificates for an employee leasing company showing workers compensation insurance that was never bound. Settlement: $10,290,000 (yes, $10 MILLION).
As you can see from the above illustrations and examples, failure to collect and review additional insured and waiver of subrogation endorsements can be extremely costly – if not detrimental – to your organization.
Primary Cause of Errors & Omissions
If these E&O issues are so common, then what’s the cause? While certainly not always the case, often times – especially at smaller agencies – the person issuing certificates is not a licensed agent, and they aren’t required to be. In fact, in some cases, the individual doing the administrative work on policies is a part-time employee. When this is the case, the individual filing the paperwork often times doesn’t have the appropriate insurance background to ensure that everything on the certificate is listed correctly.
When issuing a certificate, there is no checks and balances process in the agency management system to verify the accuracy of what this person types out on the certificate itself. Even if not intentional it is very, very easy for the administrator to free form something in the “Description of Operations” box that is not accurate to the policy itself. This error leaves you, the Certificate Holder, trusting information that is misleading and will not stand up in court.
Therefore, it is important to request the copies of the additional insured and waiver of subrogation endorsement to confirm those critical requirements, and not just trust what is written on the COI itself. In addition, it is effortless to simply Google a “fillable certificate of insurance” and create one on the fly. Fraudulent certificates are real and some vendors will unfortunately do this as a way to cheat the system. Collecting the endorsements for yourself will help to avoid a potential disaster.
Ensure Your Organization is Protected
Certificate of Insurance Management Solutions exist for one reason – to help you handle the everyday tasks of managing COIs and protecting your company against underinsured claims, costly litigation and failed audits.
myCOI exists for one reason: to help you handle the everyday tasks of managing certificates of insurance and protecting your company against underinsured claims, costly litigation and failed audits. The software is an easy-to-use, cloud-based solution developed and supported by a team of insurance professionals and is built on a foundation of insurance industry logic to automate the COI communication process and ensure you remain protected.