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Why Adding Verbiage to COIs Could be a Big Mistake

Should you include copies of additional insured endorsements with certificates of insurance, or can you just make a statement on the certificate?
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After reading through the extensive information available in the Big “I” Virtual University (VU) regarding certificates of insurance, an agent understands that including actual endorsements with certificates is a best practice.

But the agent wonders about using a tactic that differs from the recommendation to include the actual endorsement for all additional insureds—is it acceptable to state “XYZ is an additional insured as respects general liability as respects premises leased to Named Insured if required by written contract”?

Q: "If so, do you have any suggestions on how you would do that efficiently at renewal when the agency management systems are set up to issue large volumes of renewal certificates at one time? It creates a second step—getting the actual endorsement and physically attaching it to the many renewal certificates."

A: “We often must balance business decisions with E&O considerations. Whenever you add verbiage to a certificate, you open it up to misinterpretation. For instance, your example: “XYZ is an additional insured as respects general liability as respects premises leased to Named Insured if required by written contract.”

Exactly what does the written contract require? For example, many proprietary company AI endorsements only provide vicarious liability. Some provide coverage on an excess basis. What if the contract specifically requires XYZ to be covered for direct liability on a ‘primary and noncontributory’ basis? Then XYZ is not afforded the degree of AI status ‘required by written contract.’

On the other hand, if you simply provide the actual AI endorsement, you transfer all responsibility to XYZ to determine if it complies with XYZ's contract.

Again, you may want to balance the likelihood of an astute attorney twisting the wording you put on a certificate with the cost of providing the AI endorsement.”

Bill Wilson is director of the Big “I” Virtual University.

This question was originally submitted by an agent through the VU’s Ask an Expert Service. Answers to other coverage questions are available on the VU website. If you need help accessing the website, email to request login information.

Tuesday, June 2, 2020
E&O Loss Control