(December 2020)
Certificates of insurance are forms that summarize the insurance coverages provided, their inception and expiration dates, limits, and the insurance company or companies that provide coverage. They are usually the standard ACORD form that insurance agents sign. However, they do not confer any legal rights to the certificate holder. They are "point in time" certifications that the coverage indicated was in force on the date it was signed.
A general or principal contractor's workers compensation insurance coverage automatically extends to injuries incurred by employees of an uninsured subcontractor or one that does not otherwise comply with workers compensation laws. Most states use this approach to ensure that injured workers receive statutory benefits.
General contractors obtain a certificate of insurance from the subcontractor (or its insurance agent) to verify that it provides workers compensation coverage on its employees. Although the certificate is only a “point in time” document, it is evidence from an outside source that there is coverage.
Certificates of insurance are used at two important times.
It is proof that the subcontractor's insurance must respond to the loss, and the general contractor can make sure the appropriate proof of loss is filed.
The workers compensation policy's final adjusted premium is based on the insurance company auditor's findings when he or she examines the named insured's payroll records. The general contractor is responsible for the full payroll for each uninsured subcontractor’s employees. A subcontractor is considered uninsured if the general contractor does not have its certificate of insurance on file. This means that general contractors that subcontract large volumes of work will be charged unexpected large additional earned premiums if certificates of insurance for workers compensation coverage from each subcontractor are not on file and available at the time of the auditor's review.