by Mary T. Pipino, CPCU
President & CEO, Donald P. Pipino Company LTD
There is value in monitoring certificates of insurance (COI’s) but the monitoring process should be done by insurance professionals, coordinated with the legal documents requiring the coverage, integrated into a claims tendering format, and include COI document retention until statutes of limitations expire. Some companies have foregone the practice of collecting COIs in favor of relying on the indemnification provisions of a contract. Strong contractual language is most important. Structure an effective COI monitoring program to facilitate the ability to transfer risk to the responsible party per the terms of the contract. This can be very valuable.
When claims personnel understand risk transfer and have access to the information on the COI, the COI becomes a valuable tool for locating the insurance of the responsible third party. Without the COI information, the certificate holder may have to pay the defense and claim costs and then legally pursue the responsible third party for reimbursement – a process that can be expensive and drawn out with uncertain results.
Take, for example, the case of a landlord who was named in a lawsuit with a large settlement demand involving a snow removal contractor. While shopping at the landlord’s location, a person was injured when a snowplow knocked them over. They suffered multiple fractures requiring surgery, lost wages, and sought “pain and suffering” damages. Before notice of claim was received, the snow removal contractor went out of business –responsibility to defend the claim and all its related expenses fell to the landlord, also named in the suit.
COI information could have significantly changed the costs associated with this claim as well as the outcome for the landlord. While a contract may have insurance provision requirements, it does not typically detail policy information such as coverage, limits, additional insured verbiage, insurer and agent/broker contact information.
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