Certificates: How Can It Be Wrong If They Accepted It?

"The certificate holder didn't request any revisions, so the certificate must be right."

How many times have you heard this said?

There is a misconception in the insurance world that accepting a certificate of insurance means accepting the policies and coverages shown on the certificate. While a certificate of insurance is a useful summary of insurance policies and coverages, it isn't a binding document. In the world of insurance, contracts are king.

For example, if a business contract requires $5,000,000 in umbrella coverage and the certificate of insurance only shows $2,000,000, it does not matter if the certificate was accepted by the certificate holder once a claim comes in. If there is a signed contract stating there must be $5,000,000 of umbrella coverage, then $5,000,000 is what is required.

A discrepancy like this could lead to an insured being found in breach of contract and, oftentimes, it is the insured or their broker on the hook for the coverage discrepancies.

Because of the importance of contracts in granting/receiving additional insured status, at the very least the insurance clause should always be provided to the certificate processor. The more information the processor has when issuing the certificate, the more accurate the certificate will be. In the situation above, if the certificate processor knows there is a discrepancy between the contract requirements and the policy limits, they can reach out to the insured and determine what the best path forward is; renegotiating the contract to be in line with the policy coverages and limits or increasing the policy coverages and limits to be in line with the contractual requirements.

At Certificate Hero, we built technology to parse insurance clauses and generate an insurance requirements table to make it easier for processors to issue timely and accurate certificates. Below is an example of how our AI-driven contract parsing solution presents key contract requirements to certificate processors.