Unfortunately most insurance certificates you receive will have one error or another. Many certificates will have several errors. Some errors will be caused by failure of communication on your part. Some errors will be caused by the failure of one or more parties to share your insurance requirements with their respective insurance agent(s) and/or broker(s). Some errors are the result of routine or shortcuts on the part of the insurance agent or broker. Some errors will be a consequence of the insured not having the insurance your requirements specify. Presuming you have taken extraordinary steps to ensure the best communication of your insurance requirements and that they are reasonable, what should you do about the other error causes?
HISTORY OF PASSIVE TECHNIQUES TO ENFORCE INSURANCE CERTIFICATE COMPLIANCE
Over many years, it still amazes me that certificate holders have not varied their arsenal to combat insurance certificate issuance errors. Generally, the only steps taken fall into one of three categories:
- delay in contract
- delay in start
- delay in payment
Each of these is a passive inducement which may harm one or both of the contracting parties more than persuade greater attention to detail regarding insurance certificate issuance. If you are a contractor and want your concrete subcontractor to start work today so your schedule does not slip, is it in your best interest to delay the start of the subcontractor’s work for an insurance certificate. What would be the dollar impact of such a delay on the general contractor, on the subcontractor, and on the subcontractor’s insurance broker. Likewise, would it be a good idea for the contractor to allow the subcontractor to start work without a signed subcontract simply because an appropriate insurance certificate has not been received. Furthermore, what is the impact to the general contractor, subcontractor and others if payment is delayed until an appropriate insurance certificate has been received?
None of these three approaches address or discourage multiple failed insurance certificates more than a single failed insurance certificate. Keeping with the same example above, what is the cost to the general contractor and their team to review multiple copies of the same insurance certificate over and over again with few if any changes?
What is the cost to a developer if their loan is delayed because their insurance certificates do not meet the letter of the lender’s requirements. What is the cost to the tenant if the landlord will not allow them to move in until an appropriate certificate of insurance is received and approved?