Certificates of Insurance Are Critical Documents
Certificates of insurance known in the Workers Compensation community as “certs” can wreck your business’s budget and possibly Mod (E-Mod or X-Mod) if not handled properly. This is a follow-up article to yesterday’s Employee Misclassification conundrum. We receive calls and emails frequently from employers with this scenario had:
- A recent large premium audit bill
- Certificates of Insurance from sub-contractors
- Shown them to the premium auditor
The premium auditor had rejected the certificates of insurance as the certificate of insurance had:
- Wrong dates of coverage
- Wrong company name – must be exact
- Expired cert
- Coverage no longer applies
- Unreadable – this occurs more often than one may think
- Insurance company no longer in existence
- Not a valid certificate of insurance form
- Wrong state of coverage
- Workers Comp coverage not indicated
- And the list goes on and on…..
The Ladder of Insurance(c) will always move non-covered claims up another rung to the first level of Workers Comp insurance available for the claim. There is a method for verifying a certificate of insurance when your company first receives it. The dilemma is how do you know if the certificate continues to be valid after the initial receipt or validity check?
The situations where an invalid certificate of insurance seems to occur most often involves the construction or temporary service industries. The sub-contractor or temporary service agency may not pay their premiums resulting in a policy cancellation. Their carrier has not the obligation, with a few exceptions, to inform your company of the cancellation.
There are a few methods to make sure that any type of sub-contractor policy cancellation will also involve the carrier or sub-contractor letting your company know of the non-coverage situation.
Many companies are now agreeing to cover the sub-contractor under their insurance only to find out the premium bill for that decision is now very huge.
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