Let me set the stage: you landed the account. Ducks are lining up in rows. Deposits are in, subcontractors are contracted, and certificates are in hand. Things look ready to break ground.
How closely have you looked at your subcontractors’ certificates of insurance, or COIs? You could be in for a rude awakening if you haven’t poured over them thoroughly. Can we talk about additional insured endorsements?
If that term makes you scratch your head, you’re not alone.
In a nutshell, this endorsement means the subcontractors you’ve hired have named you (your company, more specifically) as an insured body on their policy; you are covered by their policy should something (a claim, loss, or boo-boo) happen.
It’s not the same thing as a certificate holder.
According to the International Risk Management Institute (IRMI) a certificate holder is “the entity that is provided a certificate of insurance as evidence of the insurance maintained by another entity.” This doesn’t mean you’re covered if you’re the holder. It just means you know your sub has coverage. In fact, it could be that you have no coverage—and huge risk—should something nasty happen. More on that later.
Ok. So What? Why Does This Really Matter?
The easiest way to explain this is to invent a situation and a person who could be any of us.
Ron is a local government official who oversees your parks department. On the side, Ron has a woodworking business where he builds tables, chairs, canoes…anything out of wood, really. He’s good, and he knows it.
Lately, business has been really booming, so Ron decides to scale. To do this, he chooses to start harvesting his own lumber to drive costs down. Luckily, he owns a large swath of wooded land ripe for the picking.
Ron lines up two logging companies to clear some of the more mature trees to be milled for stock. One company provides their certificate of insurance to Ron with him named as an additional insured. The other company doesn’t, but Ron has no idea what this even means, so it goes unnoticed and unaddressed.
Both companies begin cutting trees down for Ron’s operation when something terrible happens. The second company drops a tree and injures a local hiker.
Ron has nothing to worry about, right?
Because Company Two didn’t name Ron as an additional insured, and their coverage was garbage, Ron is on the hook and is buying Company One a new truck; falling trees don’t tend to leave vehicles salvageable. Ron has no course of action to transfer his loss – he wasn’t named as an additional insured.
Unfortunately, this bankrupts Ron, ends his marriage, and forces him into a deep, dark hole. He survives on beef jerky and Little Debbies. It’s sad.
Don’t be like Ron.
This was all avoidable. You see, insurance is complicated. It’s full of big terms like “subrogation” and “broad form contractual liability.”
People often conflate the terms certificate holder and additional insured as being one and the same. You can clearly see here that they aren’t. Ron held the company at fault’s certificate; it just did nothing to protect him. He was literally a certificate holder. You saw how that ended.
That assumption is dangerous, costly, and just doesn’t need to happen.
Understanding these ideas and the world of insurance is important, but that doesn’t mean they have to fall on your plate. You already have enough to juggle. Understanding insurance and the intense nuance therein shouldn’t be another thing you need to focus on. Having a “Y” in the wrong box could cost your company huge amounts of money, if the endorsement isn’t valid.
If Ron had used myCOI to track and verify coverages on the certificates of insurance his subcontractors handed him, he would still be married, building boats and chairs and whatnot, and able to keep forging forward in his business.
Our software can erase these worries before they even happen. We prevent the headache that comes from tracking and verifying certificates of insurance, the very thing you need to make sure your subs are above board and can offer recompense if something bad happens, are all truly in line. We not only verify that insurance is in place, but we also make sure coverage is current, that it has enough to cover a substantial loss, and if there are any gaps you need to be made aware of at any point.
With our Concierge plan, you get all of this backed by a human insurance expert overseeing things on your behalf. It’s like having your staff beefed up covering your tail so you can focus on what you know—building boats, or homes, or whatever it is that you’re really good at doing.
To say insurance is complicated, with its legalese, ever-evolving rules and laws, and vastly expanding need, would be a misnomer.
You need a partner who understands insurance and compliance so you can stop worrying about it.