Certificates of Insurance Basics
It is very common for third parties to request a Certificate of Insurance that proves the fraternity/sorority or chapter has purchased insurance coverage. This request can be satisfied by obtaining a Certificate of Insurance that shows your limits and coverages. When a third party asks for evidence of your insurance, you need to complete the Certificate of Insurance Request Form in the appendix of this document or complete the Certificate of Insurance Request Form on our website.
If yes, do not sign the contract until you have contacted Ruth Akers at MJ Insurance. If you sign the contract, you may unknowingly be obligated your organization to unfavorable liability and/or indemnification requirements that could put your organization in jeopardy.
If you are unsure if the contract contains insurance requirements, look for the following verbiage examples:
- “The renting party (i.e. the chapter) shall be solely liability and responsible for all costs, expenses, damages, liabilities, claims or suits incurred or resulting from the use of the property rented.”
- “The renting party agrees to fully indemnify and save and hold harmless [specific venue/entity name] from and against any and all claims.”
- “The renting party shall submit proof of insurance naming [specific name of venue/entity] as additional insured.”
While these examples are the most frequently used phrases that cause us concern from an insurance standpoint, contract language is often complicated, so it is always better to be safe and send the contract to Ruth Akers for review.
If a third-party is requiring Additional Insured status, they are looking to your organization’s policy to defend them and pay claims on their behalf, even if they are negligent in causing a claim.
Additional Insured requests relating to social events are heavily scrutinized; therefore, it is important that you allow two weeks to allow for the necessary parties to review.
The below suggestions are recommendations only, not requirements. The information below should be kept on file for your records. We do not need copies of this information.
Please refer to your organization’s risk management policies for specific conditions required by your fraternity/sorority.
When you rent an establishment or engage the services of someone, it is recommended that you obtain a Certificate of Insurance to ensure they have purchased insurance for their operation. If the third-party vendor does not have insurance, then the fraternity’s/sorority’s policy may have to respond, which is not preferable. Your agreement with a third party vendor will dictate what coverages should be represented on the Certificate of Insurance. For example:
- If you are renting an establishment, you will need to have evidence of their General Liability coverage.
- If an establishment is providing alcohol related services, you will need to have evidence of their General Liability, Liquor Liability and Workers’ Compensation coverages.
- If you are hiring a contractor, you will need to have evidence of their General Liability, Workers’ Compensation and Automobile Liability coverages.
- If you are hiring a bus company for group transportation, you will need to have evidence of their Automobile Liability coverage.
As a guideline, the following limits of liability are a minimum that you should accept from a third- party:
|Workers’ Compensation/Employer’s Liability
We have established the above minimum recommendations for the following reasons:
- Increased cost of materials and health care costs have significantly impacted the average cost of a claim.
- If there is bodily injury, the costs could very easily exceed the minimum threshold notes above.
- The cost of the insurance premium for a lower limit of insurance would likely be less than a fifteen percent discount for the contractor or venue. The industry now views the minimum limits above as the minimum they will offer and rarely provides limits lower than $1M.
- We and our clients believe that those that control the exposure should bear the most responsibility in paying for a claim.
A red flag should arise any time a contractor or venue shows resistance to or hesitation with these minimum limits of insurance, and you may want to reconsider your arrangement. In our experience, if a contractor or venue refuses to provide proof of adequate insurance limits, it is because they do not have any insurance, not because they do not have adequate limits.
Any time a chapter contracts with a venue, contractor or any third-party for services, it should be clear that each party is responsible for the consequences of their performance and/or work and the conditions under which the service will be rendered. This contractual relationship exists so those who are in the best position to control the exposure are also the most likely to incur the liability for those incidents that may occur. In an ideal world, each party’s insurance policies would respond to the extent that they are negligent in causing either property damage or bodily injury. The essence of this risk management technique is to transfer the liability to the entity/individual the most able to control the exposure. Establishing a minimum expectation is a reasonable effort to ensure that this transfer happens and that you are doing business with a professional and reputable entity or individual.
Does MJ Insurance approve events?
No, MJ Insurance offers recommendations based on prudent risk management. Your National Organization has the ultimate decision as to the approval of your event. It is important that you review the rules and policies of your national organization before you begin the event planning process.
I have a Certificate of Insurance that I received for an event we had last month. Can I use it again for an event that is being held next week?
No, Certificates of Insurance are all issued on an event specific basis; therefore, each time someone requests a Certificate of Insurance from you, you must obtain another Certificate of Insurance. Furthermore, the venue/third-party requesting the Certificate of Insurance will want to be sure that their name is listed as a Certificate Holder on the Certificate of Insurance, which is another reason why Certificates are issued on an event specific basis.
I have an Insurance Overview that shows we have coverage. Can I use it when I am asked for a Certificate of Insurance?
No, the Insurance Overview contains specific and confidential information regarding your chapter and should not be shared with anyone outside your organization.
How long does it take to process a Certificate of Insurance?
It depends on what exactly is required by the specific venue and the nature of the event. We recommend that you submit requests two weeks in advance in order to ensure timely delivery, but we are happy to help you with Certificate requests at any time. Completing the Certificate of Insurance Request Form in its entirety is the best way of ensuring timely processing of your Certificate request.
We are renting a venue that will be serving alcohol. Is evidence of their state liquor license sufficient?
Each state has very strict guidelines for businesses who are licensed to sell alcohol, and we certainly recommend that you only use businesses that have a current liquor license. However, it is equally if not more important, that you require evidence of the business’ liquor liability insurance coverage, which is separate coverage from general liability insurance and will have a separate limit of liability. For much more information on this issue, please refer to our position paper.