Administering The Collection Of COI’s

Administering the collection of certificates of insurance is a time consuming, but critically important process. It requires a dedicated filing and suspense system. This system can either be manual or automated or a combination of both. Many of our builders keep a large ring bound book that’s alphabetized by subcontractor name. For each sub, a certificate of insurance is filed for the current year and any prior year. Most builders set a computer suspense for one week prior to expiration of each sub’s Work Comp and General Liability policy. At that time, they ask their sub to have their insurance agent send an updated copy of the certificate for the policy renewal.

Once the copy is received, it should be carefully reviewed, and if acceptable, it should be placed in the ring bound book. An of course, a new suspense entry should be set up for the next policy renewal. The suspense can be entered into automated systems such as Quick Books which won’t allow payment to a sub until an updated certificate has been collected and entered into the system.

There’s a certain mindset that you need to have when dealing with your subs. First, never, ever make full payment to your sub without a currently valid certificate of insurance in your hand. Second, never believe a sub when he tells you that he’s insured and you’ll soon be getting his certificate of insurance. If you don’t have a certificate in hand but need to make payment, go ahead and make a partial payment but treat the sub as if he is uninsured and deduct or withhold for Work Comp and General Liability. If you do later get a currently valid certificate of insurance, at that time you can reimburse the sub for your deduction.

Another important point is that you should always receive the certificate of insurance directly from the sub’s insurance agent via mail, fax, or email. It’s best to not accept the certificate if the sub directly gives it to you. The reason for this is because its not uncommon for a sub to commit Work Comp fraud by giving builders fabricated certificates of insurance that are not valid. Some subs do this so they don’t have to spend money on Work Comp. It’s amazing how today’s computer software technology easily allows for false documents to be created and altered.