It’s conventional wisdom: You’re named as an additional insured on a third-party policy. The policy lapses. You get a cancellation notice and follow up to ensure compliance. Right? Don’t be so sure.
In a perfect system, notice of a policy cancellation would come in before (or shortly after) the actual cancellation date. You’d have sufficient time to contact the named insured to confirm that a new policy is in place with another agent. If it’s not, you’d have the opportunity to limit your third party’s access to the site, or you could withhold payment until they resolve the insurance issue. You’d maintain your compliance and mitigate potential risk to your company.
In reality, cancellation notices are informative at best – non-existent at worst. Insurance carriers aren’t legally obligated to notify additional insureds of primary coverage lapses. That means, even if your third-party contract requires the vendor/tenant/subcontractor to notify you when coverage lapses or expires, you might not get the message if the third party doesn’t hold up its end of the deal.
So, what does that mean for your company? According to Robert M. Horkovich and Pamela Hans in a recent RIMS blog post, if you don’t receive a required cancellation notice,
“…your company may be in breach of its…own insurance, other contract requirements, or bid requirements…[and] your company may have to fund defense and other payment obligations that would otherwise have been insured under the insurance policy.”
What can you do to minimize risk to your company and help maintain its financial security? Be proactive about soliciting cancellation notices rather than waiting for correspondence that may never come.
Want to know more about Quarterly Tracking? Check out last month’s blog post.
Let Lumie handle the paperwork
Keeping every certificate current is a lot to ask of any team. illumend, from myCOI, reads each certificate and endorsement against your requirements, flags what’s missing, and follows up with your third-party partners for you. You’ll see who’s covered, and who isn’t, without chasing a single email.
Want to see it in your workflow? Schedule a demo and we’ll show you how illumend fits.
