Why Do All Contractors Struggle with Certificates of Insurance? Part 2 of 3
Posted by Robert Phelan on Mon, Dec 21, 2009 @ 08:04 AM
You really don't want to hear this but I won't be of any use to you if I don't tell it straight. There are three reasons that COIs don't work well for the construction industry:
Ignorance
Laziness
Weak COI Administration
Ignorance - Every party to the COI is ignorant in one way or another.
The lawyers who draft the insurance language that goes in the job specifications and contract are ignorant about the nuances of insurance coverage and many times use antiquated or inappropriate language
Insurance underwriters think that their clients have perfect insurance administration systems
Insurance agents, who are often generalists, don't begin to understand the intricacies of the specific coverage forms required in construction contracts
Upstream owners and contractors don't understand what they should be looking for when they receive a COI
Downstream subs and sub-subs don't know really know if the COI they are sending upstream accurately reflects their true coverage or whether it's what the contract requires
Laziness -
All parties are lazy about changing a system they don't realize is broke.You,the contractor, can't be lazy any longer! Got it? This little piece of paper called a Certificate of Insurance (COI) can mean the difference between staying in business and shutting the doors. You have to figure out what it (the COI) means and how to administer them (all the COIs you send or receive) or be prepared to keep the $$ around to pay an uninsured claim. 
Weak COI Administration - It's rare to find a contractor with a bulletproof system
In most construction firms, this amounts to nothing more than attaching whatever COI is provided (by a downstream party) to the appropriate contract and making sure that the coverage is renewed for as long as the job remains active. This doesn't cut it any more.
In the next post I'll describe the ideal COI administration system that a Risk Advisor would implement with you.
Read part 1 of our 3 part series on COIs