Risk & Business Magazine JGS Insurance Magazine Fall 2017 | Page 7

CERTIFICATES
BY: GWENYTH P. LUU, CLCS,
VICE PRESIDENT OF PROPERTY & CASUALTY,
JGS INSURANCE
What’s The Deal With Certificates
Of Insurance?
W
hy are certificates of
insurance so universally
hated by insurance
brokers and risk
managers alike? Some
insurance professionals would just as soon
have their teeth drilled without novocaine
than deal with these much-maligned
documents. Yet if used properly, they
provide value as an important tool in the
risk manager’s portfolio.
For the uninitiated, according to
Investopedia, a certificate of insurance
(COI) is defined as
“ a document issued by an insurance
company/broker that is used to verify the
existence of insurance coverage under specific
conditions granted to listed individuals. More
specifically, the document lists the effective
date of the policy, the type of insurance
coverage purchased and the types and dollar
amount of applicable liability. ”
The problems arise when people assume
that certificates of insurance do more than
they actually do. They are not an ironclad
guarantee of coverage, but they do provide
a baseline from which the risk manager,
attorney or business owner needs to do
his or her own due diligence. For example,
a product liability COI can demonstrate
coverage for a supplier that is ordering
a particular raw ingredient to be used
in the manufacturing process. It shows
the manufacturer that the supplier had
coverage at the time of its issuance.
The COI contains valuable information
about where the insurance was obtained,
which broker executed the transaction, the
period of time covered by the insurance
and the terms and limits of each policy.
However, it is not a guarantee of coverage at
any particular moment in time. Although
insurance was obtained at some point, it
is still up to the risk manager or business
owner to ensure that the coverage is still
valid and will be adequate for the situation
at hand. If the risk is considerable, it may
be worthwhile to examine the actual
policy or obtain additional or more recent
documents that demonstrate that the
insurance policy is still in effect.
An insurance endorsement is another form
of documentation that may be useful in
such cases. The endorsement can be used
show the addition, termination, exclusion
or alteration of coverage in any way. Since
endorsements are issued by the original
carrier of the insured, they can provide
further detail about the exact terms and
conditions under which the coverage
is valid. Regardless of their particular
content, at the very least they should
include the name of the insured, the policy
number, and the exact dates of coverage.
Certificates of insurance may have their
limitations, but they are a great starting
point to ensure that you have some sort
of documentation to help better manage
risk in your day-to-day transactions.
From there, you should take reasonable
measures to ascertain their validity and
relevance—particularly if you are working
with a new vendor or are a fledgling
company that can’t afford even the
smallest mistake.
If you are uncertain about what
documentation will provide the assurance
you need to feel comfortable with a
part icular vendor or other party, be sure to
call your JGS broker for further assistance.
JGS brokers are always available and happy
to help determine appropriate coverage for
your situation. +
As an insurance expert who focuses on
the non-profit and food processing sectors,
Gwenyth Luu has seen many unusual
exposures and claims. That’s why she knows
firsthand that it’s imperative for businesses to
work with an industry-specialized insurance
partner. Gwenyth has earned a certificate of
completion in the HACCP System.
Gwenyth and her family reside in New Jersey.
When Gwenyth isn’t working, she enjoys
CrossFit training, reading and cooking.
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