Certificates of insurance explained: what property managers ask for and how to get one

Say a property manager emails you on a Thursday: before the first work order goes out, they need a certificate of insurance naming them as certificate holder and as an additional insured. Those two phrases sound alike and mean very different things. Knowing which is which is most of the job.

What is a certificate of insurance?

ACORD, the organization that publishes the standard insurance forms, describes a certificate in its certificates FAQ as a document that provides information about insurance policies: generally the lines of insurance, their limits and the insurer providing coverage. ACORD does not issue certificates or insure anyone. Your agent or broker fills out the form and sends it. For liability coverage the form is the ACORD 25, the Certificate of Liability Insurance.

The top of the ACORD 25 (here is a blank copy posted by the National Park Service) states its own limits in capital letters. The certificate is "issued as a matter of information only and confers no rights upon the certificate holder," and it "does not affirmatively or negatively amend, extend or alter the coverage afforded by the policies below." ACORD's FAQ adds that "only an endorsement, rider, or amendment to the policy can effect changes in coverage." The policy is the contract. The certificate describes it.

What is on an ACORD 25?

The form is one page, and it reads top to bottom:

• The producer box names the issuing agency; the insured box shows your business under the exact name on the policy.
• The coverage grid lists general liability, auto, umbrella and workers' compensation, each with a policy number, dates and limits. Two narrow columns, "ADDL INSD" and "SUBR WVD," flag additional insured status and waivers of subrogation.
• The description of operations is free text for the job or property.
• The certificate holder box names the client; the cancellation box beside it says how notice of cancellation is handled.

Above the grid, the form prints a line worth taking literally: "limits shown may have been reduced by paid claims." And the workers' compensation row asks whether any proprietor, partner, executive officer or member is excluded.

What is the difference between a certificate holder and an additional insured?

The certificate holder is the party the certificate is addressed to. Being named there gets the client a copy of the information and nothing more; the form says it confers no rights on the holder.

An additional insured is someone your policy covers besides you, and that status lives in the policy. The ACORD 25 says so directly: "If the certificate holder is an ADDITIONAL INSURED, the policy(ies) must have ADDITIONAL INSURED provisions or be endorsed," and "a statement on this certificate does not confer rights to the certificate holder in lieu of such endorsement(s)." The same warning covers a waiver of subrogation, which certain policies require an endorsement for.

So when a client asks to be added as an additional insured, your agent has two possible answers. Either your policy already contains additional insured provisions that reach this client, or the insurer needs to issue an endorsement. Either way, the proof is the policy language or the endorsement page. A checked box only points to it.

Notice of cancellation works the same way. The certificate says only that notice "will be delivered in accordance with the policy provisions," and ACORD's FAQ explains that a typical liability policy obliges the insurer to notify only the first named insured, unless the policy is endorsed to notify someone else. A client who wants to hear about a cancellation is asking for an endorsement too.

What do per-occurrence and aggregate limits mean?

Of the general liability limits, two do most of the work. "Each occurrence" is the most the policy will pay for any single incident. "General aggregate" is the most it will pay for all covered claims in the policy period combined, and a box on the form shows whether that aggregate applies per policy, per project or per location. The California Department of Insurance's commercial insurance guide describes what happens at the top: once total claims exceed the annual aggregate, "the policy limits are exhausted and no more claims will be paid from the policy for the duration of the policy period." Products and completed operations carry a separate aggregate of their own.

Suppose a policy's aggregate is twice its per-occurrence limit. Two large claims early in the year could use up the aggregate, even though each stayed under the per-occurrence cap, and leave nothing for a third. That is why a client reads both numbers. The limits clients ask for vary by client and by contract; the figure to meet is the one in your agreement.

What liability insurance does Florida require of licensed contractors?

If you hold a state contractor's license, Florida sets a floor. Section 489.115(5)(a) of the Florida Statutes requires an affidavit, at initial licensure and at every renewal, that you carry workers' compensation insurance as chapter 440 requires, plus public liability and property damage insurance "in amounts determined by rule of the board." The rule is Florida Administrative Code rule 61G4-15.003. General and building contractors must carry $300,000 in public liability and $50,000 in property damage coverage. Residential, sheet metal, air conditioning, roofing, mechanical, pool, plumbing, underground utility and excavation, solar, pollutant storage system and specialty contractors must carry $100,000 and $25,000.

The coverage has to be maintained continuously and carried in the licensee's name, and the Construction Industry Licensing Board audits a random sample of licensees for proof. The dollar figures have stood since the rule was last amended, in 2007. The Board's FAQ adds that active licensees must also keep workers' compensation coverage or an exemption.

These are license minimums, and they apply only to state-licensed trades; a painter or handyman working in an unlicensed scope has no figure under this rule. Our post on the handyman exemption explains where that line falls.

Do you need workers' compensation coverage in Florida?

It turns on your industry and your head count. Section 440.02 brings private employers with four or more employees under the workers' compensation law, and construction employers with one or more. In construction, a sole proprietor counts as an employee too. The Division of Workers' Compensation's coverage requirements page adds that owners who are corporate officers or LLC members count toward those numbers, and points to Florida Administrative Code rule 69L-6.021 for the trades treated as construction.

Owners can opt themselves out. According to the Division's exemptions page, an exemption is issued to an officer of a corporation or a member of an LLC, not to the business, and the person who takes it cannot recover workers' compensation benefits. For construction, the Division's coverage and exemption brochure lists the conditions: the company must be active on Sunbiz, the applicant must own at least 10 percent of it, no more than three officers of a company or affiliated group may be exempt, and the fee is $50. Under section 440.05, the certificate is valid for two years, and the application includes an online tutorial on coverage and compliance.

An exemption covers one person. Employees still need a policy, and the application requires you to certify that they have one. The certificate also carries a printed notice that it is not a license from the Department of Business and Professional Regulation.

When a general contractor asks for proof, it is following the law. Section 440.10 says a contractor "shall require a subcontractor to provide evidence of workers' compensation insurance," and that a corporate subcontractor with an exempt officer must provide a copy of the exemption certificate. The Division's coverage page explains why: if a subcontractor has no coverage, its workers become the contractor's employees, and the contractor pays the benefits when one is hurt. A property manager hiring you directly may ask for the same proof for its own reasons; our vendor vetting routine shows your paperwork the way that manager sees it.

How do you get a certificate of insurance quickly?

Ask the agent or broker who sold you the policy, as ACORD's FAQ advises. A complete request moves fastest, so send:

• The certificate holder's exact legal name and mailing address, as written in the contract, not a nickname or a property name.
• The insurance section of the contract, so the agent can check limits and coverage types against your policy.
• Any status the contract requires, such as additional insured, waiver of subrogation or notice of cancellation, with a request to say whether each is already in your policy or needs an endorsement.
• Any wording the client wants in the description of operations, such as a property address or contract number.
• Where to send the finished certificate.

When your policy renews, send every client a fresh certificate. ACORD's FAQ notes that the majority of certificates are issued at policy renewal, and a certificate showing last year's dates proves only that you were insured last year.

1Stop asks every vendor for a current general liability certificate on file, and an expired one blocks you from being assigned at dispatch, automatically. See what working with 1Stop involves, what it looks like for contractors in the Orlando area, or apply to join. Put another way, the expiration date printed on your certificate is the day assignments stop, unless a renewed one is already on file.