06 May What Can We Do When We Can’t Comply?
I recently taught a webinar about certificates of insurance and talked about common coverage requirements we encounter. It’s posted in Passport if you want to view it.
When we review contracts or leases, we often see insurance requirements we can’t comply with, either because our carriers don’t provide the coverage or because the coverage doesn’t even exist. We’ve all seen the requirement to add a CG 20 10 11 85 “or its equivalent.”
We often deal with “box checkers.” You know who I’m referring to. Maybe it’s someone working with a general contractor or, ugh, one of the third-party compliance organizations. They are not going to accept our certificates until they check the boxes.
These people often don’t know anything about insurance or don’t understand that we are not magicians. Sometimes, our only answer to them is, “There is no way to comply with this requirement.” Our insured is often mad at us, but they should have checked with us before signing the contract. If they can’t get the requirement removed from the contract, they may be self-insuring an exposure.
Here’s a question I recently received from an agent friend and my response to him. You have probably seen this same request. Remember that BAP coverage is written on an accident basis, not an occurrence basis.
The question:
Recently, a few companies/COI service companies have asked us to provide Commercial Auto Liability Coverage for $2 million per occurrence. Previously, we have always shown a $1 million auto policy limit with a $1 million Umbrella/Excess limit or higher, and it has been accepted. They are now demanding the $2 million limit. I am unsure why they want the $2 million limit and are unwilling to accept the $1 million underlying and the $1 million umbrella.
My reply:
We are seeing this request/requirement more frequently. Some carriers only provide BAP limits of up to $1 million. Some will increase the limit to $2 million. If you are dealing with a company your insured is working for, or there is a COI service company, they might be unwilling to budge on this requirement. Talk to your carriers about this and their willingness or ability to increase the limit. Often, the company your insured works for, or the COI service company, will not accept the umbrella to provide higher limits. This might be a requirement you can’t help your insured comply with.
The parties might be concerned they cannot directly access the insured’s umbrella limit after the insured’s underlying BAP limit is exhausted. The insured’s umbrella might provide “horizontal” coverage and require the exhaustion of the other party’s BAP coverage before they can access the insured’s umbrella limit. If the umbrella provides “vertical” coverage, this might not be a problem.
What do we do when we receive requests like this? We can only do what we can do. We tell the insured we can’t comply with the requirement and document our response. We should not deal with the certificate holder directly but tell our insured to advise them, “My agent can’t comply. Can we get this requirement removed?” If the insured is angry with us, we tell them why it’s important to let us or their attorney review the contract before signing it. Sometimes, these requirements can be “headed off at the pass” before a problem arises.
It’s just another day in paradise for us. I want you all to take comfort in the fact that I pray for you every day.