Loss Control Standard 5

LCS #5 – Certificates of Insurance (COI)

Requirement: Adopt a written, procedure, incorporating minimum PennPRIME criteria, requiring COIs be obtained from contractors. Maintain a list of contractors and current COIs for each.

Best Practice: Have all COIs reviewed annually by your insurance representative or Penn PRIME and address findings.

Measure of Compliance: Annually, submit form verifying continual compliance with requirements by the end of June.

Intent: Minimize the risk to the entity that contractors will not be able to finance the claims, losses and/or defense costs arising from injury or damage caused by their negligence, while performing work or services on behalf of the entity.

Guidance

Any time you hire a contractor to perform work on your behalf, select a vendor or permit others the use of your facilities, these relationships create risk to your entity that the actual or alleged negligent acts of the other party will result in claims or suits against your entity. For this reason, the contracts, vendor agreements, purchase orders, leases, facility use agreements/permits should spell out who is responsible for the negligent acts of the respective parties to these agreements. The entity needs to transfer the risk for negligent acts of others (as well as avoid the assumption of responsibility for the negligent acts of others) via hold harmless, indemnification, waiver of rights of recovery and insurance requirements in the contracts. As such, you need to centralize contract management with support from your legal counsel. Inappropriate or unfavorable contract language can cost you time, money and more.

Once the responsibility of the contractor (vendor/tenant/user) is outlined, there needs to be a mechanism to provide evidence of how the obligations will be financed. An obligation by a contractor to defend and indemnify your entity would have little value if they do not have a source of funds to pay for it. In most instances, this is addressed by requiring insurance coverage with forms and amounts that provide reasonable protection for the entity. The most accepted form of providing evidence of the existence and scope of required insurance coverage is a Certificate of Insurance (COI).

Version 08/18/2022