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Certificate basics (insurance)

Certificates of insurance

Customers often want their contractors to provide proof of insurance coverage. A contractor might be able to do this informally by simply emailing a scanned PDF of its file-copy certificate.

But many times the customer (really the customer’s lawyer) will want the proof of insurance to be in the form of one or more original certificates of insurance. These are issued by the insurance carrier(s) and are normally sent directly to the other party, with the other party’s name in the "Certificate holder" box.

For an example of an insurance certificate on an ACORD industry-standard form, see this annotated version from the University of California.

Ordinarily, a plain-vanilla certificate of insurance is purely informational and does not give the certificate holder any rights under the policy. That’s where "endorsements" come in. Two commonly-used endorsements, as seen in the example ACORD certificate cited above, are:

  • Additional-insured endorsements, discussed in more detail below
  • Notification endorsements, requiring the insurance carrier to endeavor to give prior notice to the certificate holder before termination or expiration of the policy (it can be difficult or impossible to get a carrier to agree to an absolute obligation to give prior notice).

For a useful overview of certificates of insurance and endorsements, see part II of Additional Insured Endorsements: Recent Efforts to Limit Coverage to the Additional Insured, by Stacy A. Broman and Jenny L. Sautter, 57 Fed’n Def. & Corp. Couns. Q. 77 (2006) (accessed Apr. 14, 2007).

Managing insurance certificates

Providing insurance certificates and endorsements can be a low-grade administrative annoyance; it often isn’t a high priority for either party’s operational people. Even if the contract requires the insured to do so, it can sometimes fall through the crack (possibly putting the insured in breach of contract).

The FirstDrafter sample clauses postpone this issue by not requiring the insured to provide certificates and endorsements up front, but still giving the other party the right to ask for them later — of course, ‘later’ may be too late to get coverage of an accident or other incident that has already occurred.

TIP: Keep contractor insurance certificates where they can be found, even years later — failing to do so could end up costing a lot of money. [p2p type=”id” value=”2668″ text=”{Casenote}”]