At our company I am the coordinator for insurance certificates. I was thrown into this position because I often work with our customers when renting or leasing a machine and the customer needs to provide insurance to us. I am also involved when customers need a copy of our insurance so we can perform service work at a job site. We found that this was an aspect of customer service best performed by someone with knowledge of the entire customer database. Your company may be very different, however as a credit professional, understanding the certificate and how it works is beneficial. Lately I have had to work with several customers and vendors on insurance certificates and it felt like a little review would be nice for everyone. Please understand that this is an overview. For specifics about your company policy or how to read the insurance certificates your company issues or to understand certificates that are issued to your company please contact your insurance agent. The agents I deal with regularly are fantastic and beyond helpful. I learn new things almost every year from them.

The insurance industry and lenders refer to the form I am talking about as a COI or ACCORD certificates. COI is an abbreviation of Certificate of Insurance and Accord and is the form name often used - thus the terminology. As an overview, please make sure that your company's legal name and address are listed in whichever section is appropriate on the form. If the form is from your customer do the same. Make sure the customer's legal name is on the form. Does this name match your customer records and forms? (Hint - all documents should have matching company names) Check the date issued and the dates of coverage. Is the coverage limited by state? Make sure the forms boxes are checked correctly for the type of insurance required. Do the dollar amounts of coverage look appropriate for the type of insurance needed? Does the form have contact information for the insurance agent? Is the form signed? Are there any adendums or additional remarks on the back or on additional pages and do you understand this additional information and agree with it? As mentioned above, please call your insurance agent if you have any questions about certificates your company issues and also about insurance certificates your company receives - your agent is a specialist in this field so avail yourself of this expertise.   

SOME EXAMPLES
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Lets start with insurance certificates issued to a vendor or customer. (Attachment A) This type of certificate is issued by your company's insurance provider to your vendors and lenders. For example, they would be issued to any lender from which you have an equipment or building loan. They would be issued to the copy machine company from which your company leases printers. It is often good practice to have your insurance company list the item(s) by contract number or serial number if possible on the description section of the form. This type of certificate is also issued to your customers if your company does service work or sales calls on a customers property. Your customer needs this certificate to assure themselves and their insurance company that they are buying from a covered and reliable company. Sometimes a customer or lender will require special and or specific wording or special types of insurance or very specific deductibles. When this occurs, check with your management or agent about coverage availability on your policy and again, does your company understand and agree to the specifics being requested? 

Now, lets look at insurance certificates your company should require if you are renting or leasing equipment or machinery. (Attachment B) Usually your companys rental agreement requires that a certificate be issueddoes someone make sure you have this in the file? This document is often as important as a signed credit application and or rental agreement. When you receive the COI, check that the policy has the correct coverage for your equipment to be covered. Do you know your customers deductible? Is the deductible amount reasonable for the type of rental or lease you are doing? For example if the customer has a 10,000.00 deductible, and your machine is worth 9,000.00the customer is basically selfinsured for this rental. By this I mean that the customer would be liable to you for all damagesNOT the insurance company as the value of your machine is under the deductible amount. Is your productequipment listed by serial number and for the replacement value on the form? Without listing replacement value on the form, an insurance adjuster may only pay far less than what your company would need to pay to replace the equipment in your rental fleet. Finally, what specific wording is listed on the form in the lower section that starts with description?  For example, is your company a loss payee or a lenders loss payable? The difference is hugehere are the definitions I was given by an agent:  

Lendors loss payable endorsement: A commercial property policy endorsement that gives a creditor of the insured that has loaned money in connection with the insured's personal property the same rights and duties that a mortgage clause gives a mortagagee.

Loss payee: A person or entity that is entitled to all or part of the insurance proceeds in connection with the covered property in which it has an interest, Often those asking to be named as a loss payee have leased some type of equipment to the insured - a photocopy machine, for example.

To further explain what these definitions mean to you I can define them by example as to what the insurance company can/will do in each of these situations. Let's say you rent a bulldozer to your customer and the customer fails to put oil in the machine and does not report any problems to your company. When the machine is returned, the engine has seized and must be replaced at a cost of about $20,000.00. The machine is not totaled, but close to it. Your company needs this machine up and running for another customer waiting for this bulldozer so you repair it and bill your customer. You call your customer to give them the repair billing. They may tell you that you need to submit a claim to their insurance company or they may ignore you. Either way, you contact the agent listed on your insurance certificate to find out how to submit the claim. After processing the claim the insurance company is ready to issue the check less the deductible. In the case of  "loss payee" wording the insurance company has a couple of options; they can issue the check to its customer (your customer) and then your customer should then issue your company a check for payment, OR the insurance company can issue a joint check with both your company name and your customer company name on the check and mail it to their customer. In my experience there could be several pitfalls with this option. 1. The customer can delay payment or fail to pay your company after they have cashed the insurance check. 2. They could pay you less than the agreed amount. 3. The customer could deposit the joint check without your company signature or with a false signature on the joint check and again, delay or fail to pay your invoiced amount or pay less than the amount due. YES, of course you would have the right to sue them for the balance owed, but you would be pursing the balance from your customer - not the insurance company. The insurance company fulfilled its obligation when it issued the check. In the case of using the "lender loss payable" wording, the insurance company will issue the check directly to your company or at least issue a joint check and mail it directly to your company as your company is a loss payable. This wording option assures that your company will receive the payment directly. In both cases the deductible is still owed by the customer.  

I know this has been a quick overview but when I discovered the huge differences just a few wording changes could have on a COI's it changed how I looked at these forms. I understood that I could better perform my function as a credit professional and protect the assets of the company by changing the COI's we received and sent. I hope you find this information helpful and if needed take the time to talk to your insurance agent. HAPPY NEW YEAR!