by Mark Cohen, J.D., LL.M., and Nick Gromicko
A commercial inspector generally works for a prospective purchaser of a property, but sometimes the owner of the property (the seller) asks the inspector for a copy of the inspector’s certificate of insurance (COI), or asks to be added to the inspector’s liability policy as an additional insured. These are two different things, so let’s discuss each.
When the Owner Asks for a Copy of the COI
The owner of a commercial property may want to see the inspector’s COI before permitting the inspector to perform the inspection. That is reasonable; however, when the owner asks for a copy of the inspector’s COI, the inspector should have two goals. First, the inspector wants to be clear that by providing a copy of the COI to the owner, the inspector is not entering into any contract with the owner. Second, the inspector wants to protect his or her own legal interests as well as his or her privacy. For instance, the inspector would not want the owner to distribute the COI to third parties who might then learn who the inspector’s carrier is, what the limits of liability are, and the amount of the premiums the inspector pays for the coverage.
When an owner asks the inspector for a COI, the best policy is to require the owner to sign a short document before the inspector provides the COI. You may see CCPIA’s template for such a document here: Sample Letter to Send to the Owner of a Commercial Property Who Asks for a Copy of the Inspector’s COI
If the owner refuses to sign the document and the inspector still desires to perform the inspection, the inspector should send a copy of the COI along with a letter or email using this sample language:
Per your request, you have requested that we provide a copy of our Certificate of Insurance (COI) prior to performing our inspection of your property at [address] on [date]. Our choice to provide the attached COI does not create any other contract between us, nor does it indicate that we have agreed to make you an additional insured on our policy. We will perform our inspection for our client in accordance with the standards set forth in our contract with our client. This COI contains confidential information concerning our carrier, our limits, and so forth, and it would harm us if this information became public. Therefore, you agree not to share the COI with any other person or entity, and you agree to destroy this COI within 14 days after our inspection. In consideration of our willingness to provide this COI to you, you further agree not to contact our insurer for any reason without first giving us written notice of any claim you think you have against us, in sufficient detail for us to understand it, as well as prompt access to the property, and 14 days to respond. In any dispute between us arising out of our inspection or our providing this COI to you, the prevailing party shall be entitled to attorney’s fees and costs. If you do not agree with these terms, please return this document to us without retaining any copies.
When the Owner Asks to Be Added as an Additional Insured
When the owner asks to be named as an additional insured on the inspector’s policy, that means the owner would be entitled to the same coverage under the policy that the inspector has. Inspectors should be hesitant to agree to this, but it may be worth it if the financial rewards for the inspection will be significant. An inspector who agrees must again be clear that by adding the owner to the policy, the inspector is not entering into any other contract with the owner and must against be concerned about protecting his/her own legal interests and privacy.
When an owner asks the inspector to be named as an additional insured, the best policy is to require the owner to sign a short document before the inspector asks the inspector’s carrier to add the owner as an additional insured. You may read CCPIA’s template for such a document here: Sample Letter to the Owner of a Commercial Property Who Asks to Be Added to the Inspector’s Insurance Policy
If the owner refuses to sign the document and the inspector nevertheless decides to add the owner as an additional insured, the inspector should send the owner a letter such as this before adding the owner as an additional insured:
You have requested that we add you as an additional insured to our liability policy in advance of our inspection of your property at [address] on [date]. We will do this under the following terms. Our choice to add you does not create any other contract between us. We will perform our inspection for our client in accordance with the standards set forth in our contract with our client, a copy of which is attached. Although you are not a party to that contract, if you believe you have a claim against us, you agree to be subject to all the same standards, notice, and dispute resolution terms that our client is subject to, as explained in the contract, except as set forth herein. We will provide you with a COI showing you named as an additional insured. This COI will contain confidential information concerning our carrier, our limits, and so forth, and it would harm us if this information became public. Therefore, you agree not to share this document with any other person or entity, and you agree to destroy this COI within 14 days after our inspection. In consideration of our willingness to name you as an additional insured and provide a COI, you further agree not to contact our insurer for any reason without first giving us written notice of any claim you think you have against us, in sufficient detail for us to understand it, as well as prompt access to the property, and 14 days to respond. In any dispute between us arising out of our inspection, the prevailing party shall be entitled to attorney’s fees and costs. In any such dispute, if a third party sues both you and us, your insurance will be the primary coverage. If you do not agree with these terms, please let us know in writing immediately so that we can determine whether we wish to move forward with the inspection.