By Charlee R. DeFebbo, alternative energy specialist at Brown & Brown Metro Insurance
It’s a precarious, but common, mistake to think that your certificate of insurance (COI) tells the full story of your business insurance program. You email your agent, your agent sends out a piece of paper with a whole bunch of numbers and letters on it, and everybody’s happy. The world continues to spin. But think about it: If you have a dispute with a customer or a subcontractor about work being done, where’s the first place you’re looking to hash out who’s right and who’s wrong? You are, of course, going to refer to the contract that both of you signed.
Your insurance policy is your contract with the insurance company. So when push comes to shove, all that jargon in the 200-and-some pages that you filed away in a cabinet or on your hard drive is what counts. Even your COI knows it; there’s a clause at the top that reads, “A statement on this certificate does not confer rights to the certificate holder.” Only the policy itself can do that. When there’s a dispute about what’s covered, who’s covered or for how much, the policy will always take precedent.
Here are three of the most important questions you can’t answer by looking at your certificate of insurance.
- Am I classified according to my actual operations?
If you’re involved in your insurance renewal at any level, you probably have the sneaking suspicion that the insurance industry hasn’t quite caught up to the solar industry. Maybe you have an executive supervisor on staff whom the insurance company insists on lumping in with your installers. Maybe you’re being classified as a home improvement store when you’re actually up on a rooftop every day. Or, perhaps your workers compensation carrier has you billed as an aluminum can collection station. All real examples, by the way. The worst part is that you wouldn’t know any of this by looking at your COI; you’d likely only find out when you have a claim that gets denied or when you get a bill after audit. Speaking of audits…
- Am I going to get a huge audit?
Your payroll, subcontractor costs and equipment sales are the figures insurance companies use to calculate your premium for workers compensation and general liability, depending on your specific business model. They also happen to be highly variable and not entirely predictable at the beginning of your policy period. So if you estimate your payroll to be $700,000 and you end up with over $1,000,000 in payroll, you can expect the insurance company to recoup some of that premium on both the general liability and workers comp policies. Ergo: It’s time for an audit. Some carriers even include language in their policies specifying that they can look back up to three years to collect any premium that they should have been paid. In many cases, you won’t even know this is an issue until you get a bill that’s due in five days.
- Am I in compliance with my contracts?
Could you imagine losing the biggest job in your pipeline right now because you agreed to something in your contract that you couldn’t actually provide? The contracts you sign are probably stipulating agreements like additional insured, waiver of subrogation and primary and non-contributory status. And you might be getting certificates that state you or your upstreams and downstreams have that coverage. But unless the correct forms are attached to the policy, no dice. And also: no coverage.
Does all of this seem like a headache that you just don’t have the extra time and energy at your disposal to fix? You’re not alone. Fortunately, these landmines are fixable, if not entirely preventable. By spending just a little bit of time getting familiar with your current policies, and by working with an insurance broker who specializes in your unique industry, you won’t have to think twice about ending up you-know-where without a you-know-what.