hello, etimer. What I have personally seen with regards to AI's and the requirement to have a written contract is that my carriers have denied coverage to the AI if there is no Written Contract in place. (meaning the AI was not entitled to defense) The carrier isn't going to deny coverage to the insured if the job is covered, but the AI is not valid. That's a subtle difference, but a huge point. If there is no contract, how do you know what the client was expected to do, and what the AI expected of them? I should also add I am in California, so perhaps our laws are different here (that wouldn't surprise me...).
The biggest issue I see with the AI's and Certificates is that the carrier is NOT obligated to do anything just because the agent issued the certificate incorrectly. If you check the $1/2/2/1 limits with a per occurrence deductible, and the policy really only has $1/2/1/1 limits with a per claim deductible, then the policy rules. It doesn't matter who has the cert (the wholesaler, the carrier, the MGU), the policy form cant' be changed by a certificate. At least not yet...
Always enjoy your posts! Have a great rest of your day.
To really go by the book, before signing, each major contract should be reviewed by legal counsel and/ or the contractor's risk management people. Reviewing downstream contracts should also be completed. As the saying goes, at time of contracting terms are negotiated and at during claims terms are interpreted.
If endorsement CG 20 33 is used providing automatic AI status to whom the named insured is contractually required to provide such status, I would want to know there is a valid contract.
I would say for a client to receive a request to add an AI but there is no written contract would be a rare bird.
More times than I care to consider, because of what previous agents told them, I've needed to tell the certificate holder that a certificate is not the legal equivalent of the insurance policy and the information on the certificate is not legally binding on the insurer(s). Many COI holders believe that certificate they have constitutes a guarantee that the insured has met the insurance requirements in the underlying contract.
The previous response is needed on the days a call is received from a GC telling me that they need to be added as AI and they need the COI today reflecting their AI status. The GC representative may get a bit miffed when I tell them that even if I issue a COI today, it doesn't necessarily mean they have AI status today but won't have said status until the insurance company is notified and / or adds them (the down-line contractor doesn't have the automatic added endorsement.) Because of their business size and what they normally do there are contractors that don't want to pay the extra $$$ for the CG 20 33 (Automatic Status When Required in Construction Agreement) and the AI must be added on the CG 20 10 and they would rather pay per endorsement.
I have a contractor that only needs about 8 or 10 AI requests each year. They manufacturer cabinets, mill work, etc. There are times they are requested to install and those are the times the GC will request (by contract) that they are added as AI. Those 10 AI requests cost an additional @$900. To go with the automatic added endorsement would cost them close to $3,000. To them it comes down to dollars and cents.
