If you own your own architectural firm or have entered into a bidding process on behalf of the firm you work for, chances are good that you have been asked to provide or obtain an insurance certificate.
An insurance certificate should be required from people and organizations that you enter into agreements with or who supply products and services to you. Let’s take a deeper look at what insurance certificates are all about and why architects in particular need them.
What is the Purpose of an Insurance Certificate?
The purpose of an insurance is two-fold:
- It provides proof of insurance coverage to third parties dealing with the policyholder. The certificate contains all the relevant information that a third party might need to know about your insurance without releasing details of your coverage that they don’t need to be concerned with.
- It may confirm to the certificate holder that your insurance company will advise them if your policy is cancelled, which gives them assurance that you have protection in place.
Certificate of Insurance vs. Confirmation of Coverage: What’s the Difference?
A certificate of insurance should be requested once you have been awarded a project or you have a standing contract with a client. Since the certificate holder is added as additional insured, to the GL (not the E&O policy), you would only want them to be listed on your policy if they have a legitimate interest in being added. If you are merely bidding on a project then the project owner should not be added to your policy.
If you are at the bidding stage and the project owner would like confirmation that you carry insurance, we can provide a letter to you. It will confirm you have coverage and state the coverage limit. The letter also indicates that if the project is awarded the project owner will be added as an additional insured to the GL policy and a certificate of insurance will be provided.
What Are the Important Terms Relating to Insurance Certificates?
If a client has presented you with a request for an Insurance Certificate, you may notice all of the following terms used for items they wish to have included. Below is a brief explanation of what each of these terms refers to, and the potential impact to your policy:
- Essentially, an additional insured is covered under your General Liability policy for their interest in the policy as it appears with respect to a specifically named project.
TIP: As a policy holder, you will want to be specific as to which location or project the additional insured relates to. This limits their protection under your policy to only those liabilities directly related to the projects you have with them.
NOTE: There is a difference between an “additional insured” and an “additional named insured”. The latter provides the listed party with access to modify add or delete the coverage they are named in connection to. Essentially, your policy is now their policy so it is essential that any additions or changes to your policy be completed correctly to avoid incurring additional liability.
- This clause means that, should a loss occur, all insureds under the policy, including additional insureds, are treated as though separate policies exist for each. It is important to have a cross liability clause added to the GL wording, if it is not already built into the policy wording. It is meant to protect both parties in the event there is a conflict and the Insurer is obligated to defend both parties.
NOTE: In the event one party violates a term of the policy that would otherwise void the coverage afforded under the policy, the other party is not denied defence or coverage for their liability as long as they have not violated a term themselves.
- A legal clause that allows the injured party in a civil lawsuit to recover 100% of the compensation due for injuries or damage from the liable party who is able to pay, regardless of the degree of that party’s negligence. Essentially, it separates responsibility for causing an injury/damage from the responsibility to compensate for that injury/damage.
NOTE: This means that even though you may be 1% liable for an injury or property damage, a court can force you to 100% of the damages should the other negligent parties be uninsured or otherwise financially unable to pay for their portion of the damages.
Waiver of Subrogation:
- The intentional waiver of any right to recover damages from another party who may be responsible.
NOTE: Typically, insurers will not provide this clause as it prevents them from seeking reimbursement for defense costs incurred as a result of defending you from a lawsuit brought on by someone else’s negligence.
Beware when signing contracts as many contracts contain this clause. If you are able to have this clause deleted from the contract, the insurer is then able to recoup indemnity and defence costs from the responsible party.
Notice of Cancellation Clause:
- The insurer will notify the listed third party if the policy for which the insurance certificate was issued is cancelled.
- Most standard clauses provide for 25 days via registered mail, however depending on the nature of the policy and the reason for cancellation, 30 days via registered mail may be provided on an exemption basis.
What Else Do You Need to Know About Insurance Certificates?
Coverages and Limits:
- When requesting a certificate, or having one issued, ensure your coverages and limits are appropriate for the exposures.
- Check the effective dates, or policy term on the certificate to make sure the dates cover the activities in question. Any time an activity or relationship will outlast the expiry date on the certificate, make sure to request a new one prior to expiry.
- When dealing with multiple third parties it is advisable to list the nature of the additional insured’s interest, or, in the event of multiple projects, your contribution and/or location specifics. This protects your policy from exposure to lawsuits that occur outside of your involvement with the project.
What Information Does Your Insurer Require For A Certificate Of Insurance To be Completed?
- The name of your client who is requesting the certificate of insurance
- The full mailing address of your client
- Details of the project including its name and location and term
What Is The Turn Around Time to Obtain a Certificate?
Once we have received all required information for the certificate, the expected turn around time is normally 1-2 business days. In some cases it can be as much as 5-7 business days if there are more complex requirements which require review by the insurance company underwriting coverage. It is best that you send in your request to us as soon as possible.
Required Client Templates or Forms: What Should You Do With Them?
Please be sure to submit any forms or templates provided to your company by the project owner for completion to our office, so we can have your insurer(s) review it for you. Although it may take a few days us to provide a completed form and/or additional information, please be assured we are acting on your behalf to ensure that the requested coverage limits, policy types, etc.are available.
On occasion the forms provided by the project owner indicate policy limits that are not available or other types of coverage that are not applicable to the type of service your firm is providing. We will provide you with details so that you can educate the project owner in turn about the requests that they are making with respect to your insurance protection.
If you have additional questions, please contact our office at 1-800-446-5745.