Certificates of Insurance: A Basic Yet Complex Risk Management Strategy
Managing the risk of your business requires more than a good safety plan. Ensuring that your vendors and suppliers have adequate insurance to cover potential claims is equally important. The first step is to obtain a certificate of insurance.
A certificate of insurance shows proof of a business’s general liability, product liability, automobile and workers compensation insurance. If there is an accident involving your goods and services, but caused by a vendor or supplier, you want to know that they have the insurance protection to respond to the damages.
While the certificate of insurance shows proof of insurance, we recommend going one step further by asking your vendors and suppliers to add you as an additional insured under their policy. By doing so, you can get the coverage and defense of the claim under their policy, thus reducing the future costs of your insurance.
Getting a certificate listing your company as an additional insured is not enough on its own. It is important that you have this requirement in a written contract with your vendor or supplier as well. If there is no written contract, the additional insured language on the certificate is unlikely to provide you with the protection you sought.
Certificate of insurance requests can be very complicated. Savvy companies will ask for "primary and noncontributory" language on the certificate. They also require to be named as additional insureds for products and completed operations and ask for specific forms to be endorsed onto your policy for their protection.
If you are in a situation of signing a contract that requires complex certificates, indemnification agreements and hold harmless agreements, check in with us first. We can help you make sure that your insurance complies with the requirements.