Insurance certificates can be dangerous documents that migrate between the insured, the insurers and many other third parties. These documents can be dangerous because they can be issued without legitimate need, or with inappropriate language which can leave the issuer with the potential for significant errors and omissions situation.
To avoid these risks, first ask yourself where the true risk lies, and whether the certificate will integrate with the contract verbiage. The point is that requiring a certificate of insurance is generally a result of negotiation between parties, which in most cases turns out to be a contractual obligation, so it is key to ask:
- Why is the certificate required?
- Why include _____ as an additional insured?
- Why add _____ as a vendor?
This will avoid the issuance of certificates being issued for no legitimate reason. Especially when in many instances, the insured has no idea of the potential liability created by asking for these documents, particularly when third parties are added as additional insureds.
It is important that you realize the potential detrimental effect on their limits created by the addition of multiple third parties as additional insureds.
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