Your Association has decided to do a retrofit of all windows in the complex so as to maintain uniformity, create utility savings and provide excellent value and service to their members. You have your skilled Manager do some research and bring you back three bids for this large project. Part of the Request For Proposal (RFP) requires that the bidding company name the Association as Additional Insured on their insurance policy. One company, Wishy-Washy Windows, sends you a document that says “Certificate of Insurance” at the top, and lists the current coverage that they carry. Nowhere on the form does it say anything about the Association being named as “Additional Insured,” although it does say the Association is a “Certificate Holder.” Are you covered?

What Wishy-Washy Windows has provided you with is “proof” of insurance – an indication that at least at some point they have carried the requisite insurance: General Liability and Workers’ Compensation insurance. That’s good. If they make a mistake while installing the windows, and a lawsuit is brought against them, you are reasonably confident that they have insurance to cover their defense and possibly pay out on the claim. But what about the Association? If Wishy-Washy Windows is performing work on the Association grounds and is sued, you can pretty much bet that the Association is going to be named in that lawsuit. If all Wishy-Washy Windows has done is show you that they have insurance, that doesn’t help the Association defend against the lawsuit.

An Additional Insured Endorsement naming the Association takes care of that. It proves the insurance carrier for Wishy-Washy Windows is aware that the company is working with the Association. The Association can be assured that, if Wishy-Washy Windows does something that is sue-worthy, the insurance company is ready to step up and defend not only Wishny-Washy Windows, but also the Association, should both be named in the lawsuit. That will keep the Association from having to use their own insurance to defend the claim.

The Additional Insured Endorsement means the insurance carrier (like Farmers, State Farm, Philadelphia, etc.) endorses the policy to reflect the Association as having the benefits of the named insured with respect to liability claims. It is more than just a piece of paper, it is a legal addition to a legal document. The agent’s/broker’s form is all fine and good, but make sure you get a copy of the endorsement from the carrier, because that is the true endorsement.

Wishy-Washy Windows may complain that it costs them money to have the Association named as Additional Insured on their policy. Don’t let that sway you. While some contractors’ policies do charge a separate amount for each Additional Insured added, that is simply the cost of doing business with a homeowners’ association. If the contractor is familiar with this industry, they will be willing to provide the document without question..

The bidding process is over, and the most qualified contractor was Wally’s Windows. Wally and his crew come to the Association, perform the work and are finished on time. (A small miracle.)

A month or so later, you are looking through your Association’s documents and come across the Additional Insured endorsement from Wally’s Windows’ insurance company. Wally is no longer working on Association property. Do you need to keep it?

The simple answer is yes. Keep a file of the Additional Insured endorsements and other proofs of insurance you obtain from all contractors and vendors. Here’s why:

Assume the first time the association experiences a heavy rain storm is about 12 months after Wally’s Windows has finished installing new windows in the complex. When the rainstorm hits you realize Wally’s work (while speedy) wasn’t the best, as a large percentage of windows installed by Wally are leaking, causing water damage to the interiors of units. Since poor workmanship is not covered under the association’s Master Policy, but meant to be covered under the policy of the company that performed the poor work, you go to your file to find the insurance information for Wally’s Windows so you can file a claim. Since Wally’s Windows’ insurance policy is an “occurrence” policy, you need to file the claim on the policy that was in force at the time the faulty installation took place… twelve months ago! If you hadn’t kept the Additional Insured endorsement (or at least proof of Wally’s Windows’ insurance coverage) you would have no way of knowing where to file the claim.

You might think you could simply call their current broker and get the information from a year ago. But what if they have changed brokers since then? This logistical nightmare could be avoided if you keep a binder for your association of all of the Additional Insured endorsements and other proofs of insurance collected each year. They can be stored away somewhere because you won’t need them on a day-to-day basis, but be sure you are able to get to them if you do need them.

Even with the most qualified of business partners, things go wrong. Make sure to keep the Additional Insured Endorsements you receive from them, and you will be able to quickly retrieve the information you need to start solving the problem.

Kimberly Lilley is the Director of Marketing for Berg Insurance Agency