Editor’s Note: This is the final part in a series of five articles from Joseph D. Walters that have covered different aspects of insurance. The previous four articles can be read at www.cleanertimes.com.

CERTIFICATES OF INSURANCE

Whether you are a small company doing house washing or a large contractor running multiple jobs at the same time, certificates of insurance (COIs) are something you should understand.

A certificate is provided to certify something. That means that it can only be provided by and filled out by or on behalf of a licensed insurance agent. Your agent cannot provide you with a blank copy that you can fill in as needed. Nor can they put all your coverages on one certificate if the coverages are with other agencies. Agents cannot “certify” coverage that is not under their control.

Most contractors just want the paper to say what their customer wants it to say so they can get the job, but the certificate can only say things that are supported by the coverages provided by their insurance and the language found in the policy contract. Therefore, there are some things that the agent just can’t say on your certificate because the policy language does not support it.

Insurance Company Rating of A or Better—All insurance companies are rated by financial service companies and given a grade based on their financial stability. If you want to check your insurance company’s financial rating, check companies such as AM Best Company at www.ambest.com or Standard & Poors at www.standardandpoors.com.

Additional Insured—This is the most common request regarding special certificate wording. Adding another person or entity to your policy as additionally insured means you are sharing your coverage with them. If there is a claim, you agree that your policy will cover your share of the responsibility and theirs. A standard general liability policy does not include this provision. It must be endorsed on to the policy. Typically, this additional insured status can be limited to apply only with respect to the ongoing operations of the named insured (you), which means that it only applies to an occurrence arising out of your work and only while you are there doing the work.

It is fairly common to be asked for this when bidding a commercial job, and not unheard of even for a residential one, but you should know what you are giving away. You and your customer are now insured jointly but have the ability to settle the claim against you individually. Your client may decide to settle rather than litigate, and he has just given away part of the insurance limit available to you. Regardless of how many “insureds” are covered, this is still only one “occurrence,” and is therefore subject to the per occurrence limit.

Further, he has also given away part of what you may have available for future claims, since anything paid out on this claim reduces your policy aggregate limit as well. Be careful to review your customer’s requests as there could be a long list of entities that want to be listed as additional insureds on your policy.

If your client also wants additional insured status for “completed operations,” he is saying he wants coverage under your policy for a claim that arises from your work but occurs after the job has been completed. This would also need to be endorsed onto the policy and is a different endorsement than the additional insured for ongoing operations. There is usually an additional premium involved to add this endorsement.

Waiver of Subrogation—Subrogation is a process by which an insurance company will seek to recover funds it has paid out for which another party may be responsible, usually in conjunction with the additional insured endorsement. The waiver of subrogation assures your client that not only will your policy pay the whole claim, but they will not come back and try to recover any of what was paid from the client’s insurance company.

Primary and Non-Contributory— Insurance policies are usually considered either primary or excess. A primary policy pays first, where an excess policy only pays if the primary policy is exhausted or not applicable. If you are asked to have your certificate of insurance show this provision, it means that your policy will pay first and not ask for contributions from other insurance policies that may have otherwise responded to the claim.

Overall, certificates are an important and necessary part of your business. If you can’t provide the certificate, you don’t get the job. But it is more than just a piece of paper or a means to an end. It may help to have a conversation with your client about the scope of your work and which requirements are applicable to what you will be doing for them. Sometimes they will waive certain requirements that are excessive for the job at hand.

Agents often find that most property managers or their vendor services department do not understand the coverages they are requesting. If you do, it gives you a leg up on them when negotiating a contract that makes sense for the job you are bidding. While the insurance policy and certificate of insurance are documents with limited wiggle room, the contract between you and your client is much more flexible, and the insurance requirements section of that contract can be tailored to match the nature of the job.

JANITORIAL SERVICES BOND

Are you or any of your employees entering a customer’s house, warehouse, or place of business? If so, you should purchase a janitorial service bond. This bond is designed to quickly and easily provide protection for you and your customers. Hopefully you never experience problems with a dishonest employee, but with our janitorial services bond, you will rest easier knowing you are covered if you do.

This bond is designed to protect your customers from losses incurred by dishonest acts of your employees. This will include part-time and full-time employees.

With five or fewer employees you can purchase a bond with a $10,000 limit for about $126 per year. You can obtain higher limits of $25,000, $50,000, or $100,000. The owner can be included or excluded. If you have more than five employees or wish to have limits higher than $100,000, contact us at 800-878-3808 for pricing.

Coverage is subject to the conviction of the defaulting employee.

LICENSE AND PERMIT BONDS

These bonds are required of those who must obtain licenses or permits from cities or towns before they can proceed with various activities such as power washing. Although used for a variety of purposes, license and permit bonds usually guarantee that the people who post them will comply with statutes, regulations, or ordinances that regulate their activities.

A contractor license bond is a very important type of surety bond that actually serves a purpose with three different parties involved in a contractor project. A contractor’s license bond legally protects the following three parties: you (the contractor), the company who has hired you, and the state bond issuing agency. By getting the contractor license bond, you are ensuring that you will always provide ethical and professional services, or there will be financial resources to compensate for any deficiency. Contractor bonding also protects the public in that you and the company that hired you are indicating that you will provide professional services that will do no harm to them. Should someone be negatively affected by an unethical decision made, then they can file against the bond for financial compensation.

A license or permit bond carries a term that corresponds with the period covered by the license or permit issued to the principal. The right to file a claim under the bond continues for varying periods, depending upon the state in which it was issued.