Importance of Certificates of Insurance

Some of the most common questions the PE Partners’ underwriting team are asked pertain to certificates of insurance. We prepared a list of the most frequently asked questions and their answers.

What is a certificate of insurance (COI)?

A COI is a proof of coverage provided to you by a third-party vendor or contractor showing limits of liability insurance for work performed or services rendered through a written agreement with you.

Why should you require them?

To verify that the vendor or third-party contractor is carrying insurance to cover them in the event of a claim that results from their actions while working for you.

When are they needed?

Any time you:

• Hire a contractor to perform a service.
• Hire a vendor to participate in a sponsored event, such as a festival or function, or if an event participant conducts any activity that may cause an increased exposure for your entity.
• Allow a private citizen to host an event on your property that is not sponsored by you.

When are they needed?

• All certificates collected from vendors and contractors should provide liability limits that are at least a $1M per occurrence and $1M aggregate limit. This should be increased according to the specific size of the contract / event. Be sure to include Liquor Liability if alcohol is involved.
• Certificates should name you as an additional insured on the vendor’s or contractor’s policy. This is to cover you for the actions of the vendor while working on your behalf.
• If you are not listed as an additional insured on the certificate of insurance, the risk has not been transferred to the contractor.
• If possible, require a waiver of subrogation in your favor. This will prevent the contractor’s insurance provider from pursuing damages against you through subrogation after a claim is settled.

Why do I have to provide one?

• Sometimes you enter contracts with third parties that require you to provide a certificate of insurance. Basically, the shoe is on the other foot.
• Typical scenarios where this is required are when you rent equipment, lease property from a third party or enter into a railroad agreement.

What does the law say?

• Governmental entities are limited to the liability limits provided within the Tennessee Governmental Tort Liability Act (TGTLA).
• These limits are $300,000 per person / $700,000 per accident for Bodily Injury and $100,000 for Property Damage.
• The TGTLA also prohibits governmental entities from assuming the liability of a third party through indemnification and hold harmless agreements.

As always, we encourage you to have your city attorney review any and all contracts. In addition, always review all policy terms, conditions and exclusions.

Do you have additional questions about certificates of insurance or your risk management program? Our team is here as a resource to each of our members. Visit Contact | Public Entity Partners | Franklin TN (pepartners.org) for more information about the programs and services that support our members or to get in contact with our regional service teams.