What is a Certificate of Insurance?

When does a Business need a Certificate?

A certificate of insurance is a document that is used to provide info about specific insurance coverages. The certificate is issued to one entity and provides information about the insurance coverages another entity has secured. The certificates are usually required as part of a contract between a business, a contractor, and a subcontractor. A certificate of insurance can be offered for General Liability, Business Auto, Umbrella, and Workers Compensation.

Certificate of Insurance

What is Included with a Certificate?

The certificate of insurance includes the type of insurance coverage that has been secured, the limits of those policies, and the named insured. The certificate will also include whether there is an Additional Insured or Waiver of Subrogation associated with any of the policies included in the certificate. It should include detailed information about the company or person who receives the certificate that includes full address, contact name, email address, phone number, and fax number. When requesting a certificate be sent to another entity, the more information you provide the better.

Who Might need a Certificate of Insurance?

Typically a certificate of insurance is needed when a business hires a general contractor for a job or a contractor hires a subcontractor to perform a specific part of a job. The certificate is provided as proof the business or the general contractor made sure the contractor or subcontractor they are interacting with has coverage in place at the time the work was done. It is important to always ask a contractor for a new certificate every time you work with them. Just because someone had coverage in place in the past does not mean they still have coverage. If a business or a general contractor hires a business who does not have proper coverage in place, the business or general contractor will take on the liability for damages in most instances.

What is a Waiver of Subrogation?

Why Might a Business use a Waiver of Subrogation

The term Subrogation refers to the right of an insurer (insurance carrier) to pursue an insurance loss to the insured (the person or entity being insured) in an attempt to recover funds paid in a claim. Conventional Subrogation refers to a relationship between the insured and insurer as defined in an insurance contract. A Waiver of Subrogation is a provision in a contract where an insured waives the right of their insurance carrier to seek reimbursement or seek compensation for losses from a negligent third party. A Waiver of Subrogation is between two parties where one party agrees to waive subrogation rights against another in the event of a loss. A Waiver of Subrogation can be used on a General Liability, Auto Liability, Umbrella Liability and Workers Compensation.

Waiver of Subrogation

What does it mean to waive your rights?

A waiver of subrogation is issued when one party within an insurance claim wants to relinquish the right of subrogation for damages paid out in a claim. Most of the time a waiver of subrogation is entered into between two businesses or a business and a contractor. When it comes to the workers compensation system the claim goes entirely on the insureds insurance history and will increase the experience modification rating of that business. The waiver is most frequently entered in to in order for one entity to force the other entity to not allow the insurance company of the insured to come after the other party within the insurance claim for damages that were the fault of that business or its employees. It is usually a requirement for a contract and the waiver gives a business the peace of mind they will not be held liable for damages if they are somehow partially responsible for a loss.

How do I obtain a waiver of subrogation?

Most insurance carriers accommodate a waiver of subrogation on most insurance policies. They are most commonly agreed upon with in General Liability, Auto Liability, Umbrella Liability and Workers Compensation Insurance. When engaged in to, the waiver increases the exposure of the insurer which may lead to a higher insurance premium. Before entering into a waiver, it is important to evaluate the probability that employees being injured while on the job. Additionally, it is important to consider whether your employees may be placed in situations where they could be injured themselves offsite due to the negligence of another third party.

Examples of Waiver of Subrogation

Construction Project

When a construction project requires adding on to an existing property. The engineers, architects, and construction company may want a waiver of subrogation for damages caused by the design and construction of the existing property.

Commercial Cleaning Company

A commercial cleaning company may be required to sign a waiver of subrogation in order to enter into a contract with a corporation to clean their property after hours. An example of where this might be necessary is if a cleaning company employee is injured on the property of the corporation they are cleaning, the insurance company of the cleaning company cannot sue the corporation for damages that caused the injury to the employee.

Landlord Tenant Agreements

When a Landlord is renting out a property to a tenant, it may require a two way agreement where both parties give up subrogation rights. The waiver subrogates rights against each other in the event of some kind of loss like damage to the building or fire.

What is an Additional Insured?

According to the Insurance and Risk Management Institute (IRMI), an Additional Insured is, ‘A person or organization not automatically included as an insured under an insurance policy who is included or added as an insured under the policy at the request of the named insured‘. Now let me try to help you understand what that means in layman’s terms. This refers to any person who is not the policyholder, but is covered by an insurance policy. This coverage may be limited to a single event like a wedding, or it could last the lifetime of the policy like when a contractor who will be working for the business throughout the entire year. Thie first and most important thing for anyone to understand are the three different entities involved in a certificate of insurance. Those three entities are the additional insured, the certificate holder, and the policy holder. Here is a brief description of each entity and when it is best to add an Additional Insured or use a Waiver of Subrogation.

Additional Insured listed on a certificate of insurance.

Entities to an Insurance Agreement

Policy Holder:

The policy holder of an insurance policy is the person or business whose name is on the policy. It is important to distinguish this person from the name insured. The named insured is the person or business the policy is purchased to cover.

Additional Insured:

A person or organization that is added to an insurance policy and that person or organization enjoys the benefits of being insured under the policy. This coverage is in addition to the person or organization who originally purchased the insurance policy. The additional insured is named on a certificate of insurance. They only have a certificate if you send them a copy.

Certificate Holder:

The certificate holder is the entity that is provided a certificate of insurance as evidence of the insurance maintained by another entity. In its most simple form, a certificate of insurance is proof of insurance. The certificate holder is holding the certificate of insurance proves a business made sure to check the insurance coverages of contractors they partner with.

Digital picture of a certificate.

When Should Someone Add An Additional Insured?

One of the most common examples of when is a landlord of a commercial building. Landlords commonly require tennants to add the landlord under their insurance policies in order to lease the facility. Another good reason to be add is your business rents a piece of equipment from another business. You may want to add the other business as an additional under your insurance policies involving the equipment.