Crucial tips for managing certificates of insurance

Understanding certificates of insurance is a critical part of risk management for your contracting clients. Your customers can be exposed to liability risk if certificates are not properly obtained, reviewed, and updated.

You can download our Certificate of Insurance Guide and Subcontractor Agreement Checklist to help your contracting clients better understand certificates.

Here are some essential points to keep in mind regarding subcontractors and collecting certificates:

• Be sure the certificates on file cover the customer's entire policy period.
• Ensure coverage and limits are adequate, so subcontractors are considered subcontractors at audit, not employees in a higher-rated class.
• Check that subcontractor liability limits are equal to or higher than the customer's. Otherwise, if there is a claim that exceeds the subcontractor limits, the customer's policy may end up contributing.
• Confirm that coverage is for the entire time it is contractually required. Many contracts require that subcontractors maintain the required coverage for a specific period following completion of the project. 
• Review contracts for record retention requirements. Maintain certificates at least two years after job completion or longer if the contract specifies.

Examine certificates to ensure that subcontractor insurance contains key coverage provisions, including:  

• Additional Insured Endorsements: Subcontractors should have additional insured endorsements that cover ongoing and completed operations.
• Primary and Noncontributory Language: A subcontractor's insurance policy or endorsements should include language that their policy will be primary for your customer and will not require your customer’s policy to contribute to a loss.
• Waiver of Subrogation:  When a subcontractor's policy has a waiver of subrogation, their insurance company will not seek reimbursement from your customer’s insurance policy for any loss payment they make. 
• Per Project and Per Location Aggregate Limits: A subcontractor's general liability policy should provide "per project" and "per location" aggregate limits for broader protection.
• Workers' Compensation: If a subcontractor does not carry workers' compensation insurance, your customer could be liable for any injury the subcontractor or their employees suffer while working for them.
• Notice of Cancellation: A subcontractor’s policy should be endorsed to give your customer a 30-day cancellation notice.