A certificate of insurance is commonly used to represent the existence of insurance coverage. However, a certificate is not a legally binding document. It cannot alter coverage terms, add additional insureds to a policy, or otherwise modify insurance policy terms and conditions.
Certificates are usually issued by insurance brokers and agents. Any error in these certificates does not bind the insurance carrier to modify their insurance contract, which is a contract between the insurance carrier and the named insured.
When reviewing a certificate of insurance, a checklist approach is suggested. The checklist used should be tailored to the individual contract for which the certificate is representing compliance. A sample checklist format is attached.
Insurance policies expire for various reasons--they can be canceled by the insurance company, the agent or broker, or the named insured; they can lapse for non-payment of premium; or they can be discontinued by the insured.
A sample "Certificate of Insurance" is attached for review. The following numbers listed below correspond with the sample "Certificate of Insurance Form" included in this section for your reference.
1. The certificate actually states that it is a matter of information only.
2. Insurance carriers can differ greatly in terms of size and financial strength. The "Best's Key Rating Guide" is the source most commonly used to confirm the financial strength of an insurance company. The contract in question may also specify minimum financial ratings. The County has minimum requirements for insurance carriers (see Section IV, MP 6).
3. Most of the time "occurrence" coverage is specified in contractual requirements. The boxes are simply checked to represent the existence of the liability policy type. Check to be sure this certificate indicates that the right type of insurance is being provided. If "claims made" is checked, Extended Reporting coverage (ADD 1 listed in Section IV) will be required.
4. Note that you are dealing with an annual policy. When does it expire? Have provisions been made to have the Contract Administration Section receive the renewal certificate when needed?
5. The limits shown here are critical to contract compliance. Add the limits here to the limits shown in the "Excess Liability" section below to see the representation of actual limits in existence.
6. "Symbol 1" coverage, as defined by policy language, provides coverage for "any auto" owned, hired, or non-owned.
7. The limits shown here are excess over (in addition to) the following primary limits: Commercial General Liability, Automobile Liability, and Employers Liability.
8. This area deserves special review, as the certificate issuer may attempt to represent additional coverage not actually included in the policy. For example, additional insureds are often represented to be added to the policy with wording in this section. Remember, the only firm proof of coverage is a copy of policy language.
9. This is where Multnomah County would typically be shown as a "Certificate Holder." Remember, just because the County is shown as such does not mean that the insurance company has any contractual obligation to the County. Coverage must be endorsed in the insurance policy to gain a contractual right.
10. The cancellation wording that is standard on Certificates of Insurance uses the word "endeavor" to describe their obligation to notify the Certificate Holder of policy cancellation. To gain contractual rights, the County must be named as an additional insured by endorsement, and the policy must be endorsed to show cancellation extensions to additional insureds.
Certificates of insurance are a commonly used tool in the industry. They are generally accepted without question by many parties. Be aware of their limitations. You can ask to review the contractor's insurance policy(ies) at any time, and you should consider doing this in situations with significant exposure. Risk Management can assist you with this review process.
Multnomah County Certificate of Insurance Checklist
- Contract #
- Purpose of Contract
- Term of Contract
General Provisions Checklist
To be used with all Certificates. Those involving major construction contracts or unusual events may require additional provisions.
The numbers in parentheses refer to the sample certificate of insurance included for your reference.
A. Is Multnomah County named as Additional Insured? (#8)
B. Is occurrence coverage checked? (#3)
C. Is there a minimum of 30 days' written notice of cancellation? (#10)
D. Is carrier admitted to do business in Oregon or rated "A- or Better" by Best's (#2)
E. Are limits adequate? (#5)
- General Liability?
- Workers' Compensation?
- Other Coverage?
F.Is "Symbol 1" Automobile coverage specified? (#6)
G. Are the Policy effective dates appropriate?
- (#4) (Will it be effective when contract is performed?)
H. Does "Type of Insurance" shown match bid and/or contract specifications? (#5)
I. Is certificate signed by a licensed agent? (#10)
J. Have you diaried for 60 days prior to expiration?
Completed by _______________________Date_________________