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Why Validate Certificates of Insurance (COIs)?

By Heather Kadavy, CERP, CBVM CFSSP (Ret.)


Today, organizations rely on the expertise of TPRM Leaders, risk subject matter experts and business lines otherwise known as the TPRM team to understand the insurance coverage carried by the third parties they engage to prepare for transferring loss as warranted.

Certificates of Insurance (COI) provide first-level evidence of coverage and provide a sense of security to protect against accidents and lawsuits that are a result of the contractor’s negligence, data breach, or a faulty product, when entering or continuing a working relationship.

The 4 P’s of Why To Review Certificates of Insurance

  1. Proves Third Party’s Insurance Status. The COI is a summary of an insurance policy and serves as evidence of insurance.

  2. Provides Quick Access to Data. The COI constitutes a one page express version of a larger insurance policy, which can save you hours of review work.

  3. Prepares Organization to Reduce Liability – By requesting & reviewing COI, you are in fact preparing for a loss transfer (aka Risk Transfer) to the third party’s insurer in the event something goes wrong.

  4. Protects Organization When Outsourcing. Ensuring that the third party's insurance aligns to your organization’s requirements, risk tolerance, and risk appetite when it comes to protecting against incidents could help alleviate costly litigation that would ultimately affect your bottom line.

The ACORD Form template is the most common certificate of insurance used for businesses in the U.S. and was designed to standardize historical forms. However, note there could be other forms provided that may be specific to insurance purchased through a state rather than through a private insurance broker or carrier.

Typically an organization will work with their insurance agent or broker when setting the organizations “bottom-line” when it comes to insurance types, limits and endorsements that they will require from different types of third parties they work with. TPRM teams should focus on building and nurturing the relationships with their insurance agents or brokers so that when they run into questions, they have a known expert partner to reach out to.

If a third party is slow or hesitant in providing a COI, it could be an indicator that they are underinsured or not insured at all.

A COI is a non-binding document and does not alter coverage. Agents and brokers do their best to ensure that the coverage provided on the COI is accurate because they face legal ramifications for providing false information; however, just because the COI states there is a certain type of coverage, limits, or endorsements (e.g. additional insured, waiver of subrogation, etc.) does not mean the “policy” has that exact same coverage and/or that endorsement changes hands. If the TPRM team or the organization's insurance agent or broker is concerned, they can always request the more detailed evidence – a copy of the third party’s insurance policy.

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