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Certificates of Insurance PDF Print E-mail
Articles - Contractors Insurance
Article Index
Certificates of Insurance
A.M. Best’s Ratings
Financial Performance Ratings (FPR)
General Liability
Occurrence vs. Claim Made
Workers Compensation
All Pages

If You Build lt, You Can Be Sued!

Thanks for reading my free report. I know you will learn a few valuable tips about certificates of insurance. I have been in the insurance industry for many years as a contractors insurance agent serving the needs of Contractors and Small Business owners; also my number one priority is to make sure my clients stay informed.

This report is intended to be a guide to Certificates of Insurance, whether you are giving a certificate to a government agency, general contractor, subcontractor, homeowner or you are receiving a certificate from a general contractor or sub-contractor. The report is divided into three general sections. They are:
  • A guide to the various sections of the certificate of insurance, what they mean and what to look for.
  • An outline and a check list so you can establish a procedure in your business to collecting and maintaining certificates of insurance.
  • An outline and a check list so you can establish a procedure in your business to collecting and maintaining certificates of insurance.
The last page is a contractors Certificate of insurance completely filled out. Please use this certificate as a basis of reference as we go through this book.

I made every effort to keep things simple and try not to use too many contractors insurance words, but insurance wording cannot be completely ignored. If you have questions please feel free to call. This subject it as important as it is complicated.

Over the years I have seen three attitudes towards contractors certificates of insurance.
  1. The contractor understands the importance of the certificate and takes great care in making sure it is handled correctly and has a "system" in his office that monitors the certificates.
  2. The contractor understands the importance of the certificate but is too busy to make sure it is done and hands the duties over to someone else in the office that is not trained to properly handle the job.
  3. The contractor does not understand the importance of the certificate and does nothing.
The truth is; Certificates of insurance, not handled properly can cost you hundreds of thousands of dollars.

Here Are A Few Examples Of How Certificates Can Cost You Money

  1. At the end of your policy period, your contractors insurance company has the right to audit your books. When the auditor comes in to look at your books he is trained to look for sub-contracted work. Since sub-contracted work is expensive to your company, it is very easy to find. He will then look for the certificate of insurance that corresponds to the work subbed out. If you cannot produce the certificate he will add the amount of sub-contracted work to your payroll, or gross receipts, in either case you will owe the insurance company an additional amount for your general liability insurance, this can add substantial amounts owed to the insurance company. This is an extra expense you did not plan on.
  2. Successful contractors take the cost of insurance into account when bidding jobs. If you are audited and have to pay an additional amount to an insurance company, your cost of insurance has gone up and the “extra” is not in your bids. The result: You did not make as much money as you thought you did, or you lost more money than you thought you did! Either way it is a lose-lose situation.
  3. In the event of a claim there are two ways to lose additional money.
    • If you do not get a certificate of contractors insurance from a sub that does not have coverage and your policy does not cover subs, the cost of this claim will be directly out of your pocket!
    • If your subcontractor does not have coverage and your policy does then the claim will go against you. When you purchase insurance for the company years, that claim will show against your record, since your cost of insurance is partly based on your claims history, your insurance will go up.
    • An outline and a check list so you can establish a procedure in your business to collecting and maintaining certificates of insurance.

Certificates of insurance are not to be taken lightly!

Starting on the next page we are going to go through each line of the certificate of contractors insurance so you will have an understanding of what all this means.

I have broken down the certificate into 14 parts, use the example on the back inside cover as we go along.

Acord Certificate of contractors insurance Item by Item

  1. Date - This is the date certificate was typed. If you request a certificate of insurance in November 02 and the certificate is dated August 02 you should ask for a newer certificate, why? A lot could have happened in the last 6 months. It also tells agencies usually get a request from the contractor and it should be recently dated.
  2. Producer - this is the agency that wrote the policy. There should be an agency name, address, and phone number and sometimes the agent’s name that wrote the policy.
  3. Insured - This is the person or the company name who owns the insurance policy. The complete name and address must be in the box. If the name or the address is not acceptable, make sure it has the corporations name on the certificate
  4. Companies Affording Coverage - This section is important. Read it carefully!


This statement, which usually no one ever reads, is very important. The only way to actually know you are covered is to have copy of the entire contractors insurance policy, and the ability to interpret the exclusions. (We will talk about exclusions later on)
  1. Company A- This is the insurance company that is providing coverage. Look for the corresponding A in the co. ltr. Box on the left side of the certificate.
  2. Company B- This is the insurance company that is providing coverage. Look for the corresponding B in the Co. Ltr. Box on the left side of the certificate.
  3. Company D- This is the insurance company that is providing coverage. Look for the corresponding D in the Co. Ltr. Box on the left side of the certificate.
What do we know about these contractors insurance companies? Are they strong solid companies, or the verge of bankruptcy?

There is a source of information on all these companies. The A.M. Best Company is used throughout the industry to evaluate the financial strength of insurance companies.


Insurance companies are given a grade, just think about the grades you received in High School or college. A, B, C, D, F. Insurance companies are given a financial report card by the A.M. Best Company.

An insurance company with less than an “A” rating can be a potential problem for two reasons. 1 there is a risk of the company going out of business, and, 2. If you work for the state, county or city, they will usually not accept any company with less than “A” rating. Also if you hire on as a subcontractor most general contractors will not accept any rating less than “A”. With some state government offices and general contractors not accepting your liability insurance, you will be limited to the type of jobs you can accept.

A.M. Best’s Ratings

A.M. Best assigns two types of rating opinions. Best’s ratings (letter scale) and best’s FPR (numerical scale). Both ratings involve a quantitative and qualitative evaluation of a company’s financial strength, operating performance and market profile.

Warning about RRG’s or Risk Retention Groups.

Over the last two to three years there have been several RRG’S set up to capitalize on the lack of contractors insurance companies willing to insure contractors. Yes the rates are good, but the coverage stinks. Read your policy carefully. If you do not understand it, send it to me, even if you are not a customer of mine. Most of these policies take more coverage away under the exclusion’s than you are buying.

None of them are rated with AM Best, because they have not been in business long enough. Many have very shaky financial backing. You want the insurance company to still be around when and if you have a claim.

Financial Performance Ratings (FPR)

The FPR is assigned to small or new companies, which do not meet the criteria required for the best’s rating. Both ratings provide an overall opinion of an insurance company’s ability to meet its obligations to policyholders.

Secure Best's Ratings
A++ and A+Superior
A and A- Excellent
B++ and B+Very Good
Secure FPR Ratings
FPR 9Very Strong
FPR 8 & 7Strong
FPR 6 & 5Good

Vulnerable Best's Ratings
B and B-Fair
C++ and C+Marginal
C and C-Weak
EUnder Regulatory Supervision
FIn Liquidation
SRating Suspended
Vulnerable FPR Ratings
FPR 4Fair
FPR 3Marginal
FPR 2Weak
FPR 1Poor

Not Rated (NR) Categories
Companies not assigned either a best’s rating or FPR opinion are assigned to one of five NR categories. The NR category identifies the primary reason a rating opinion was not assigned to the company.

NR-1Insufficient Data
NR-2Insufficient Size/or Operating Experience
NR-3Rating Procedure Inapplicable
NR-4Company Request
NR-5Not Formally Followed


This is to certify that the policies of contractors insurance listed below have been issued to the insured named above for the policy period indicated, notwithstanding any requirement, term or condition of any contract or other document with respect to which this certificate may be issued or may pertain, the insurance afforded by the policies described herein is subject to all the terms, exclusions and conditions of such policies. Limits shown may have been reduced by paid claims.


First off let’s get one thing clear…ALL contractors insurance policies have exclusions. You hear terms like all risk, special form, comprehensive, full coverage. Those phrases do not mean there are no exclusions.

In a contractors general liability policy all the exclusions are listed on the (Dec) front page of the policy or on the second page of the policy. The problem is that they are usually listed by form number, not by name.

In order to make sure you understand the exclusions, look at the form numbers on the front page and go find that form (by number) in the policy. (Usually the form number is in the bottom left hand corner)

If you see a form number on the front of the policy but cannot find that form in the policy, your policy is not complete! Someone forgot to add that form to the policy was put together. People make mistakes! If you find a form number on the front of the policy and cannot find that form in the policy call your contractors insurance agent and ask them for missing page(s). it may be a very important exclusion.

The exclusions are critical! When you get a proposal for insurance the first thing you should look out at are the exclusions.

For instance, if you are a concrete contractor and you do house pads, if you have exclusion for foundation work in your policy you have a problem. The worse thing is you will not find out about your problem until you have a claim and it is denied, by then it’s too late.

Here is a list of exclusions I have found in many policies; this is by no means “all inclusive”.

Look over this list and see what exclusion would apply to your operation


Claims arising from any classification or class code not listed on the declaration page of this policy. For example: You are a roofing contractor and you get a quote that is 50% less than all other quotes. The policy comes in and your company is classified as a landscape contractor. Any claims will be denied because you were not classed correctly.


Claims arising out of: The act or omissions of independent contractors while working on behalf of any insured, or the negligent hiring or contracting, investigation, supervision, training, retention of any independent contractor for whom any insured is or ever was legally responsible and whose acts or omissions would be excluded, if you use subs, this exclusion can be a killer.


No Coverage for exposures to asbestos, asbestos fiber, or any material containing asbestos or asbestos products, including without limitation, the costs of asbestos removal or damage in the course of effecting such removal. (Very Common Exclusion)


Claims arising out of the rendering of or failure to render any professional services by you or any engineer, architect or surveyor who is either employed by you or performing work on your behalf in such capacity. Professional services included: The preparing, approving, approving, or failing to prepare or approve. Maps, shop drawings, opinions, reports, surveys, field orders, change orders or drawings; and Supervisory, inspection, architectural or engineering activities. For example, if you make a structural change without the architect’s approval, there is no coverage. (Very Common Exclusion)

Construction Management Errors


This means that if you hire sub contractors, you must get a certificate of insurance from them. If you do not, the amount of your contract with the subcontractor will be added to your payroll or gross receipts and you will be charged. In other words you will pay for the subs general liability. Some companies use a stricter version of this. They require the sub to have the same limits of insurance as you do.


Claims arising directly or indirectly out of formaldehyde whether or not the formaldehyde whether or not formaldehyde is airborne as a fiber or particle, contained in or a part of any building, building material, insulation product or any component part of any building.


Explosion, collapses, and underground. Not a good exclusion for grading, excavation contractors.


Some roofing exclusions are plain and simple. NO ROOFING. Some are not as strict. You must read the exclusion carefully. Some roofing exclusions say there is no coverage while the roof is under construction or repair. For example: You tore off a roof, since the weather forecast called for sunny skies you decide there is no need to cover the roof overnight. It rains… there is no coverage. Read all exclusions carefully.


Plain simple, No demolition Computer failure to recognize the year 2000.


Contractors Insurance does not apply to any liability arising out of landslide, Mud flow, Earth Sinking, Earth Rising or Earth Shifting.


Claims arising out of the actual or alleged presence or actual, alleged or threatened dispersal of lead, lead particles or products containing lead.


Any work in connection with the preconstruction, construction, post-construction, reconstruction, exterior remodeling or repairs of any multi-unit residential building.


Claims that are in progress prior to the commencement of this policy.


Not a good idea if you are a landscape contractor.


This is a very severe exclusion. This says that any work you did prior to the policy date is not covered. For contractors this can be a death sentence on all prior work 99% of all contractor claims occur years after building was built.


Exterior insulation and finish system means the design, manufactured, construction, fabrication, preparation, installation, application, maintenance or repair, including remodeling, service, correction, or replacement, of an exterior insulation and finish system or any part, thereof or any substantially similar system or any part, including the application or use of conditioners, primers, accessories, flashing, coatings, caulking or sealants in connection with such a system when performed by you.


The elevation of swimming pool due to high water table.


Claims arising our of foundation work, including but not limited to the design, specification, inspection, construction, installation, repair, replacement, improvement or reinforcement of any foundation or any part of a foundation. Foundation means the entire substructure below the first floor or frame of a building, including but not limited to any footings, footing beams, piers, grade beams, pilings, pilings or support upon which the building rests.


But you need to read and ask questions about any exclusion you do not understand!

General Liability

  • Commercial general liability must be checked.
  • Occur box must be checked

Occurrence vs. Claim Made

Check to see that the occurrence form box is checked. If the claims make box is checked do not accept the certificate or allow the contractor on the job site. The description of difference between Claims Made and Occurrence coverage forms could take up 4 or 5 pages of this report. This is not the time or place to go into it. If you run into it, call to discuss. Check to see that the cert has the following:
  • Policy number - General Liability policy number must be completed.
  • Effective Date-Date must be completed.
  • Expiration Date-Date must be completed.
  • Limits-All limits must be completed.

Contractors Insurance Auto Liability

  • Any auto-Means any owned, rented, leased or borrowed auto. It includes hired, non-owned, newly acquired, replacement and temporary substitute autos.{2}
  • All Owned Autos- Means autos you own. (And for liability Coverage any "trailers" you don’t own while attached to power units you own). This includes those "autos" you acquire ownership after the policy begins.
  • Specifically Described "Autos"-Means only those "autos" described in item three of the declarations for which a premium is shown (And for liability for any trailers you don’t own while attached to any power unit described in item three)
  • Hired Autos- Means any auto that you hire, rent, lease or borrow from others, other than your employees or members of households.
  • Non-Owned Autos- Means Any auto that: you don’t own, hire, rent, lease borrow; and is used in the conduct of your business. It includes autos owned by your employees or partners or member of their households. But only while such autos are being used in the conduct of your business.
Why are these auto descriptions important?
When hiring sub contractors it is important because the subs are bringing their cars to your jobsite. If a sub drives onto the job site and causes an accident, the sub is responsible. But if the sub does not have auto insurance, the general contractor is next in line. Why? Because you hired him and he is on the job site working on your project. When hiring a sub you should require him to have auto insurance. The next step is to require the sub to have high limits of auto insurance, if you have $1,000,000 auto insurance so should the sub.

To fully protect your business, insist that the sub have "any auto" or owned auto coverage and Hired Auto and Non-owned Auto.

IT May seem that you are asking a lot from your sub, but that is what it takes to protect your business.

Always check that:
  • Policy number-Contractors Insurance Auto Liability policy number must be completed.
  • Effective Date-Date must be completed.
  • Expiration Date- Date must be completed.
  • Limits- All limits must be completed.

Excess Liability - Optional

  • Umbrella Form or other than umbrella form?
Sometimes you will have to give a certificate of insurance to a general contractor or ask a sub contractor to increase the limits of his general liability. There are two different ways of doing this. Most people think an Umbrella policy and Excess policy are one in the same but they are not.

Excess Policy- An excess policy is simple; you can add additional coverage to your contractors insurance general liability. You may have a $1,000,000 limit but you are required to have $3,000,000 for the project. An excess policy is written for the two additional million that you need.

Umbrella Policy- This is a little different, actually it is a lot different. You may be asked for $3,000,000 liability AND 3,000,000 auto liability also. In this case an umbrella is needed. Umbrella policies increase your general liability AND commercial auto insurance.

Workers Compensation

  • The proprietor/partners/executive officers are included or excluded.
Lets stop and think about this for a minute

If you receive a certificate from a contractor and the owner or partner are on the jobsite. The owners most likely do not have work comp on themselves. Why? Because they are not required to have it. They may have work comp but only for employees. This is an area that is misunderstood by most contractors, and to make matters worse, most contractors insurance agencies do not mark the box at all.


There is none! That’s right, sole proprietors and partners cant buy it most corporate owners just plain don’t buy comp themselves. That means if the owners are injured on the job, they make a claim for work comp benefits under your policy. Will they win? Not every time but they can unless you take the proper precaution. The trick is to make sure they are "independent contractors" under the definition of the law. If you do not already have a copy of my report on "who is an independent contractor" then call. The process is.

Hint, one of the best solutions is in the documentation you have with the contractor, make sure that you have a signed written contract with the subcontractor that clearly states that he is a independent contractor and not a employee. Most of the industry standard contracts have such wording but they are useless if you do not insist on having one in the file with every sub.
  • Policy number-Auto Liability policy number must be completed.
  • Effective Date-Date must be completed.
  • Expiration Date-Date must be completed.
  • Limits-All limits must be completed.
Description - This box is used to explain things such as:
  • Name and address of project.
  • Naming the additional insured. (this is discussed later on)
  • Cancellation wording for non-payment or reporting on work comp payroll.
Certificate Holder - this is the person that the certificate is issued to. A full name and address in mandatory!!!

Cancellation - Should any of the above described policies be cancelled before the expiration date thereof, the issuing company will endeavor to mail ____ days written notice to the certificate holder named to the left, but failure to mail such notice shall impose no obligation or liability of any kind upon the company, its agents and representatives.

Will endeavor to is the problem here…

Will endeavor to simple means the insurance company will try to let you know if the policy has been cancelled. For many certificate holders will endeavor to is not good enough. The reason is they want to be notified if a contractor’s insurance is going to be cancelled so they can ask the contractor for a new certificate or get him off the job site before his coverage runs out.

This causes a problem because most contractors insurance companies will not allow the agent to cross out the will endeavor to wording. Read your contract, see what the requirements are and call your agent to work out an arrangement.

Even with the will endeavor to wording crossed out, there is no gurantee that you will get notice of cancellation.

Signature must be signed.

Acord form version - This should be Acord 25 or 25-s. there are other certificates of insurance other than the Acord form. Sometimes a city or county will have their own, or a contractors insurance company may have their own. But all the information will be there. Maybe not in the exact order of the Acord form.

Attachments to the certificate of insurance Everything we have talked about up to this point is part of the Acord Certificate Of Liability Insurance form. Now let’s talk about additional form(s) that must be attached to the certificate form. (if they apply)

Acceptance Many governmental agencies, cities, general contractors and more and more, smart homeowners will ask to be additional insured. What is Additional Insured Endorsement?

The primary reason for additional insured endorsements is defense coverage; another reason is to insulate your loss experience by making it unnecessary to make a claim under your own contractors insurance liability policy.

Here is an example: A general contractor hires an electrical contractor and asks the electrical contractor to name the general contractor as an additional insured on the electrician’s contractors insurance liability policy.

Back in the good old days the contractors insurance companies were happy to issue what is what we called a GC 20 10 11 85. (The letters and numbers are code that means Comprehensive General liability form 20 10 the last two number are the date the endorsement was published. 11 November 1985 form.

This is too bad as the endorsement provided the general contractor with a lot of coverage including unlimited completed operations coverage.

In Oregon companies are offering a few different form the CG 2010 1005 and CG 3261 1005. lets take a look at both forms and what they do.

The CG 3261 1005, this coverage form limits the coverage to on going operations which means in English, that once the subcontractor completes his job and leaves the job site the additional insured status ends. Does that mean that there is no coverage for what the sub did while he was on the job site? No. it just means that the general contractor does not have additional insured status after the sub has completed his task and left the job site. In other words, the subcontractor and their insurance company regain all of their defenses in the event a claim is brought against the subcontractor.

The CG 2010 1093 form, adds you as an additional insured, but only to the extent that you may be held liable for your work performed for the insured, in other words your sub adds you as an insured. You work will be covered only while you are doing work for that insured at the jobsite. What do you do?

The best defense is again is have a good contract, and know your subcontractors.

As an additional safeguard you should ask that the subcontractor make his insurance primary non contributory. We will discuss this in detail.

In the coverage description insist that the agency list the edition number of the additional insured endorsement they intend to use.

Make a note, the contractors insurance company should send you an actual copy of the endorsement they use. Check to make sure that the edition date matches the one on the cert. you should have it within 45 days.

Recap: Any time you hire a sub-contractor you should ask to be named as additional insured on his policy to protect yourself from errors of the sub. The same goes it you are a sub who hires a sub.

Primary endorsements- along with the above additional insured endorsement, many people are asking for primary endorsements, 99% of all contractors insurance companies have an additional charge for these as well, anywhere from $30-$250 each.

Primary insurance wording are issued in conjuction with additional insured endorsements.

Using our general contractor and electrician example above: the general contractor wants to be sure that regardless of what insurance he has (general contractor) the electricians insurance company is first (primary) on any claim. It also goes to state that the liability is determine to be solely the negligence or responsibility of the electrician.

Again if you are not sure, fax a copy of the endorsement to my office. I will be happy to interrupt you.

Certificate of contractors insurance checklist and verification procedures I know I have been throwing all this information at you and now its time to sort it out. The first thing you must do is to set a standard set of insurance requirements that all sub contractors must meet in order to work for you.

Ok, here wee go step-by-step.

Step #1


What contractors insurance requirements are you going to ask of your subs?

The certificate of insurance on the inside back cover of this book is a good example of insurance limits that most general contractors require. (except for the umbrella option) look it over, adopt this as your requirement of make changes. Remember to require your sub contractors to name you as additional insured and primary.

Remember that these requirements are yours. Asking for these limits endorsements allow you to protect your biggest asset. YOUR BUSINESS.

Step #2


Someone in your office must be in charge of certificates of contractors insurance. Depending on the size of your operation, it can be the owner or a person designated by the owner to handle the job. It has been my experience that contractors like to build things, they do not like to handle paperwork. If you are a one-man operation, make this a priority, or nicely ask your spouse to do this job. (after, you both sit down and read this book)

If you have employees, designate someone to do the job. (after, you both sit down and read this book)

P.S. Another good reason for the owner not to handle the certificates of contractors insurance is that certificates need to be verified, to verify a certificate you need to make a phone call. An office person is better suited for this job that an owner who is in the field.

Step #3


DO NOT MAKE EXCEPTIONS FOR ANYONE….NOT your brother, uncle, father, best friend since high school, current girl friend or boy friend, good buddy who is down on his luck right now, NOBODY...

Step #4


NOBODY goes on the jobsite until you have received his or her certificate of contractors insurance (with your requirements typed in) and the additional insured endorsement(s) and primary endorsements you require in order for them to bid on your project.

Starting on the next page I have put example of an insurance packet you can include with the job specs.

Use my sample packet or devise your own.

A good time to get your certificates of insurance file in good order is when you are not busy, you know, when you are between jobs. This way when your jobs start you will be ready and you will not hire subs and have to wait until they get their certificates in to you. You will already have them on file and ready to go.

Step #5

(On your company letterhead)

Insurance requirements for Sub Contractors

Dear Sub-Contractor,

In order to work for (your company), we have a set of contractors insurance requirements that must be met before you can start on our jobsite.

Please look over the requirements before bidding, to make sure you can comply. If you do not comply, your bid will not be considered.

Please provide a certificate of insurance, additional insured endorsement, with a primary and non-contributory endorsement attached. If you are not sure if you have a required insurance and endorsements, fax a copy to your contractors insurance agent for confirmation.

Your contractors insurance agent can quickly tell you if you have the correct coverage or will need additional coverage to comply.

We are looking forward to you bid.

Thank you,

Step #6


Now we have a copy of the sub-contractors certificate of insurance, additional insured endorsement, and a primary endorsement on our desk.

Using the checklist, go through each section of the contractors insurance certificate and see if anything is missing, misspelled or the dates are wrong. If there are errors call the insurance agency that gave you the certificate and ask them to make the correction s and fax a new one back to you.

Step #7


This is the area that can cause a problem and the only way to find out in advance is to ask.

For example; in Oregon, 95% of contractors insurance companies exclude Condo’s, Townhouses and apartments. If you were building one of these projects, you should call the contractors insurance agency and ask a very simple question.

Call the agency and ask the agent or customer service person handling the sub-contractors account are there any exclusions on the policy regarding condo’s, townhouses and apartments? If there answer is yes, the certificate you are holding is worthless.

If there answer is no, then kindly ask the person to send you a short note stating there are no exclusions for the condo’s townhouses and apartments.

Each state is different; there may be areas of construction in your state are a problem. You know what they are, and if you don’t, call and ask your agent.

If you are hiring a concrete contractor for house pads, a good question to ask is, are there any exclusions on the concrete contractors regarding house pads?

If you are hiring a landscaper who is going to use chemicals, call and ask regarding the use of chemicals.

If you are hiring a grading or excavation contractor, ask about exclusion regarding the use of chemicals.

Look at my list of exclusions and look at your own policy for exclusions to formulate your questions.

I realize this is more work, but the question is do you want to know about these potential problems before or after the claim?

Certificate Of Insurance Checklist
Subcontractor Name ____________Trade_______Lic.#_______
  • Contract signed
  • Certificate of Contractors Insurance received
Company’s are A rated
General liability section
  • Occurrence box marked
  • General liability limits (Minimum must match your limits)
  • General liability experience date current
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