Collecting Certificates of Insurance from Subcontractors

Certificates of Insurance

Doing so the proper way prevents future headaches

Are you collecting certificates of insurance from your subs and then filing them away, never to be seen again?  It’s important to know there is a proper way to go about collecting and maintaining subcontractor certificates of insurance. Improper or haphazard recordkeeping can bite you in the back during the annual insurance audit.

First things first

A certificate of insurance (COI) is simply a standard form issued by the subcontractor’s insurance company summarizing the coverage he or she carries. It is highly recommended that you only hire subcontractors who can provide a COI.

All COIs should be reviewed carefully to avoid fraud. If you don’t recognize the insurance company, research their financial strength rating. Don’t accept a COI directly from the sub. Ask that it be forwarded by the insurance company. The COI should indicate the sub carries at least Workers’ Compensation and General Liability. Auto insurance is highly recommended.

Make sure the COI is current; it’s only valid from the date of issue, and the insurance company is not required to notify you if the policy expires or is cancelled.

Never make a full payment to a sub for whom you don’t have a current COI. If necessary, make a partial payment, advising the balance will be paid upon receipt of a valid COI.

Organized recordkeeping is essential

We recommend keeping a file of all COIs organized alphabetically by subcontractor names. Some policies may expire before the project is complete. We recommend setting up a reminder system set one week prior to their policy’s date of expiration for subs to have their agents release updated COIs.

It’s important to keep all COIs on file until expiration of the statute of repose. That is the deadline for a homeowner to file a claim against the builder for any property damage.

Want more information?

We invite you to take advantage of our series of risk management training videos for builders, which provide detailed information on collecting certificates of insurance and related topics.
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