1: FAQs About Certificates of Insurance
is a certificate of insurance?
It's evidence of insurance -- proof of a contractor's financial ability
to pay for a loss caused by the contractor's negligence. No coverage benefits
are afforded to the certificate holder.
are certificates needed?
They're needed when another party performs services on our behalf, has
our property in their care, custody, and control, and/or controls or directs
our employees. The dollar amount of a contract may not reflect the actual
risk. For example, some small-dollar contracts or purchase orders (such
as pyrotechnic displays or transportation contracts) are high-risk exposures.
if I am not sure if a certificate is needed?
Ask: What can possibly go wrong? How likely is it to go wrong? If it does
go wrong, how much will it cost? Who should pay for the loss if the contractor
does something wrong?
insurance coverages should I request?
Most contracts and purchase orders require commercial general liability,
automobile liability, and workers' compensation insurance. Depending on
the exposures, other types of coverages may also be required. Refer to
the "Insurance Requirements Checklist"
on our Web site (www.dist.maricopa.edu/legal/incklst.html).
amounts of limits should be requested from the contractor?
See the "Minimum Insurance Limit Guidelines"
on the Legal Department's Web site (www.dist.maricopa.edu/legal/matrix.pdf).
lower limits permitted for small contractors or artisans who are performing
small jobs for us?
No. These are the people we want the limits from, since they may not have
the assets to indemnify us in case of a serious, underinsured loss.
a contractor's insurance does not meet our insurance requirements, should
we alter the requirements to fit the contractor's insurance?
No. This language has been carefully worded to afford us as much protection
as legally possible. Altering the language would weaken our position.
If the contractor is unable to comply with the limits requested, contact
the Risk Manager for guidance.
I always ask for the MCCCD to be named as an "additional insured"?
Additional insured means that the MCCCD will be named as an "insured"
on the contractor's insurance policy. If the contractor is negligent and
a claim is filed against us, the contractor's insurance company defends
the claim for us. The insured may or may not pay an additional premium.
We can only be named as additional insured on general and automobile liability
policies. MCCCD should always be named as the certificate holder and the
additional insured, not the college.
if we don't have the certificate when the contractor starts the work?
There are no good choices when this happens (and it's why the insurance
specifications should be given to the contractor early). Either we must
delay the work, or we must "self insure" the contractor until
we receive and accept the certificate. (Don't forget that we self-insure
the first $100,000 of any liability loss. So if the contractor does not
have insurance, and a claim is filed against us because of the contractor's
negligence, MCCCD will have to pay the first $100,000 of that claim.)
in the Winter 2001 Edition of In Brief