Do You Charge for COI's?

[AZDave]

If you insure contractors, that is what you will get. Every year I toy with the idea introducing a certificate policy to my contractors. Maybe a buy up feature, or statement of expected costs for x amount. Some of these guys have very heavy time consuming requirements and you will lose money on some accounts.

I lost an account last March 2016. They cancelled mid term to go with a 'consultants' recommendation. In the 8 months I had them, there was over 250 certificates. Most involved property management apartments/condo with multiple property ownerships. The certificates were not easy and seems California vendors in particular can be a super pain in the arss. Many required scheduled status, some accepted blanket endorsements. All wanted crazy wording that had to be addressed. The account was $35,000, so a decent size. But I was not upset to see them go. They called me to quote this renewal, not happy with their current agency, and had since parted with the consultant. I passed.

Maybe this guy will grow to $35,000 and only need 3 - 4 certs per month. Tell him your going to charge, and maybe he will find an agent who won't charge. Hard to pass on a broker fee to direct billed policies. How much time would one then spend with the special billing? I have provided many certs more for much less.

Good Selling!

 

[InsCommentary]

Yes my issue is we made $400 in commission but he is costing me $30 a month in CSR work. Pretty damn annoying. Any Captive Agents charging for COI's? I have a huge commercial client that I make 10k in commission and I could care less how many COI's they want.

You might find this article interesting:

"Certificates of Insurance...What Do They Really Cost?"
Virtual University - Certificates of Insurance...What Do They Really Cost?

I know a number of agents who have let good sized accounts go because of the expense in managing the COI requirement. This is especially true in states that don't allow agents to charge fees.

In one case, once the agency did a cost accounting of one contracting account, they found that their cost in issuing COIs was triple the commission income. They gave up the account, the contractor moved to another agency, then begged the former agent to take him back because of the poor service of his new agency. He was willing to pay extra but the law did not allow the former agent to accept such a fee.

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P.S. With regard to the E&O exposure, the largest E&O claim I've ever seen was for $150 MILLION. A certificate was issued that showed $200M in flood coverage. What the COI didn't show was that the flood coverage had a $50M sublimit for property located in a Special Flood Hazard Area which, of course, was where the property damaged by flooding was located. The damage was about $200M, so the broker was sued for $150M. The last time I looked, the chancery court filing had not gone any further, so it's possible the claim was settled. If so, I don't know for how much.

 

[VolAgent]

You might find this article interesting:

"Certificates of Insurance...What Do They Really Cost?"
Virtual University - Certificates of Insurance...What Do They Really Cost?

I know a number of agents who have let good sized accounts go because of the expense in managing the COI requirement. This is especially true in states that don't allow agents to charge fees.

In one case, once the agency did a cost accounting of one contracting account, they found that their cost in issuing COIs was triple the commission income. They gave up the account, the contractor moved to another agency, then begged the former agent to take him back because of the poor service of his new agency. He was willing to pay extra but the law did not allow the former agent to accept such a fee.

----------

P.S. With regard to the E&O exposure, the largest E&O claim I've ever seen was for $150 MILLION. A certificate was issued that showed $200M in flood coverage. What the COI didn't show was that the flood coverage had a $50M sublimit for property located in a Special Flood Hazard Area which, of course, was where the property damaged by flooding was located. The damage was about $200M, so the broker was sued for $150M. The last time I looked, the chancery court filing had not gone any further, so it's possible the claim was settled. If so, I don't know for how much.

So what is your answer to the COI problem, short of simply not providing them.

 

[InsCommentary]

Always use ACORD forms (the courts have generally upheld the disclaimers) and don't add any extraneous verbiage that might be construed to be ambiguous, misleading, misrepresentative, or even fraudulent. Only issue COIs in accordance with state law and your agency/company agreement. You'll likely be fine 99.9% of the time. For the other 0.1%, that's why you have E&O insurance.

From the recipient's standpoint, a COI only tells you that some kind of policy is in force as of a specific time. I've told the story online many times about my personal experience with a tornado that took out 19 trees in my yard. I got 4-5 bids from tree service companies. I asked for proof of insurance and, to make a long story short, one of the bidders had a 2004 ISO CGL policy shown on the COI, which is a fine form. However, as supporting documents showed, attached to it were 42 endorsements, one that limited coverage to how they were coded ("tree trimming and pruning") and another that excluded "ongoing operations" and "your work" (aka completed operations). The COI showed they had a CGL policy. They did. It didn't cover anything they were doing. I can give you a half dozen examples of this off the top of my head.