Subcontractor insurance glossary
The words on a certificate of insurance and in the insurance section of a subcontract, each in a sentence or two. Where the states differ, the definition says so.
A
- ACORD 25
- The standard one-page certificate of liability insurance used in the United States. An insurance agent or broker issues it to summarize a policyholder's coverage on the day it is issued. It is not the policy and does not change it. See What is an ACORD 25?.
- Additional insured
- A person or organization that is not the policyholder but is given insured status under someone else's liability policy, usually by an endorsement. The status applies only within the terms of that endorsement. See Certificate holder vs additional insured.
- Aggregate limit
- The most a policy will pay for all covered claims during the policy period, however many there are. Once it is used up, the policy pays nothing more under that limit until it renews.
- AM Best rating
- A grade given to an insurance company by the rating agency AM Best, reflecting its opinion of the insurer's financial strength and ability to pay claims. A contract may set a minimum, for example A- with a financial size category of VII.
- Anti-indemnity statute
- A state law that limits how far a construction contract can make one party pay for another party's own negligence. What each statute prohibits, and whether it also reaches additional insured coverage, varies by state.
B
- Blanket additional insured endorsement
- An endorsement that gives additional insured status to any party the policyholder has agreed in a written contract to add, without naming each one. Whether it applies to you depends on its wording and on your contract. See Additional insured endorsements.
C
- Certificate holder
- The party a certificate of insurance is issued to. Being named as certificate holder gives no coverage and no rights under the policy. See Certificate holder vs additional insured.
- Certificate of insurance (COI)
- A document, issued by an insurance agent or broker, that summarizes the policies a business carries on the day it is issued. It is evidence that the policies exist. It is not the policies, and it cannot change what they cover. See Check a certificate.
- Claims-made policy
- A policy that responds to claims first made during the policy period, usually for events on or after a stated retroactive date. Professional liability is often written this way.
- Completed operations
- Liability for injury or damage that arises from work after that work is finished. In construction a claim over finished work can arrive years later, which is why a contract asks for this coverage to continue after the job.
D
- Description of operations
- The free-text box on an ACORD 25 where the agent can add notes, such as the project name or the endorsements said to apply. What is written there is a statement on the certificate. It does not change the policy.
E
- Each occurrence limit
- The most a liability policy will pay for any one occurrence, meaning one accident or event, however many people make a claim from it.
- Employers' liability
- The part of a workers' compensation policy that covers an employer's liability to employees for work injuries outside the statutory benefits, for example a lawsuit. It has its own limits, shown on a certificate as each accident, disease each employee and disease policy limit.
- Endorsement
- A page attached to an insurance policy that adds to, removes from or changes its terms. An endorsement is part of the policy. A certificate is not.
- Exclusion
- A provision in a policy that removes coverage for a stated kind of claim, activity or loss. Exclusions are in the policy and its endorsements, and a certificate does not list them.
F
- Flow-down
- A contract clause that passes obligations from one contract down to the next tier, so that a subcontractor owes the general contractor what the general contractor owes the owner. Insurance requirements can be passed down this way.
G
- Ghost policy
- An informal name for a minimum-premium workers' compensation policy bought by a business owner who has no employees and is not covered by it. It produces a certificate, but it may pay nothing if the owner or an uninsured helper is hurt.
I
- Indemnity
- A promise in a contract by one party to cover another party's losses of a stated kind, such as claims arising from the first party's work. It is a contract obligation, separate from insurance, and how far it can go varies by state.
M
- Monopolistic state
- A state where workers' compensation is bought from a state fund and not from a private insurer: North Dakota, Ohio, Washington and Wyoming. Employers' liability is generally not part of the state fund's coverage and is arranged separately.
O
- Occurrence policy
- A policy that responds to injury or damage that happens during the policy period, whenever the claim is later made. General liability is usually written this way.
- OCIP and CCIP
- Owner controlled and contractor controlled insurance programs, also called wrap-ups. One party buys liability coverage, and often workers' compensation, for the enrolled contractors on a project, in place of each bringing its own for work on site.
- Ongoing operations
- Work while it is still in progress. An additional insured endorsement limited to ongoing operations does not apply to injury or damage that happens after the work is complete.
P
- Per project aggregate
- An endorsement that makes a general liability policy's aggregate limit apply separately to each project, so that claims on one job do not use up the limit available to another.
- The insurer's review, after a policy period ends, of the payroll, sales or subcontract costs the premium was based on. For workers' compensation, payments to a subcontractor with no evidence of its own coverage may be added to the audited payroll; the rules vary by state. See Premium audit exposure calculator.
- Primary and non-contributory
- Wording, usually in an endorsement, under which one policy pays first and does not ask the additional insured's own policy to share the loss.
S
- Statute of repose
- A law that sets a final deadline for claims over construction work, measured from a fixed event such as substantial completion, whenever the defect is found. The length varies by state.
- Statutory employer
- A party that the law treats as the employer of another firm's workers for workers' compensation, typically a contractor whose subcontractor has no coverage. When and how this applies varies by state.
- Subrogation
- An insurer's right, after paying a claim, to recover what it paid from the party that caused the loss.
U
- Umbrella policy
- A liability policy that adds limits above underlying policies such as general liability, automobile liability and employers' liability, and may cover some claims they do not. An excess policy adds limits only, on the underlying policy's terms.
W
- Waiver of subrogation
- An agreement, shown on the policy by an endorsement, that the insurer will not seek to recover a paid claim from a named party. In a subcontract it stops the subcontractor's insurer from pursuing the general contractor.
These definitions are general and are not legal or insurance advice. What a term means for a given policy is in the wording of that policy, and state law differs: ask your broker or your attorney.
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