When a contractor is hired to perform work on one’s property, there are risks involved. As most prudent homeowners know, it is always wise to verify that the contractor you hired to work on your property carries proper and valid insurance. This is most commonly achieved by the contractor providing the owner with a Certificate of Insurance (“COI”). But, what most homeowners probably do not know is that a COI by itself is worth very little to the owner. It is strictly an informational document providing absolutely no coverage to a homeowner. It is a false sense of security.
The COI’s main purpose is to confirm that the policy holder (contractor) has insurance coverage on the date of issuance. It does not create any contractual relationship between the insurance carrier and the property owner nor provide any coverage to an owner. In fact, it is possible that coverage may no longer be in force after the date of issuance for one reason or another. Nevertheless, homeowners may take certain steps to benefit from the contractor’s insurance coverage.
One such way to ensure coverage in the event of a claim is to require the contractor to name the owner as an “additional insured” via an endorsement to the policy. ‘Additional insured’ status provides, among other benefits, that the homeowner is given actual coverage and rights under the contractor’s policy. Simply put, a COI is proof of insurance, while additional insured status is coverage under the policy.
It is always best to use reputable contractors and vendors, but even then, homeowners should insist upon being named as an additional insured under the policy. Doing so safeguards the owner’s interests in the event of an accident or claim. To make certain that you are adequately protected, consult with an attorney or your insurance broker.
