How a Certificate of Insurance Can Help You Manage Risks

Since residential care facilities serve vulnerable populations, every activity involves risks. To manage these risks, facilities screen and train employees and carry liability insurance. However, exposures may still exist if third parties are involved. To further protect your facility, you should require a certificate of insurance from every third-party service provider.

How Third-Party Providers Can Create Risk

Consider the following scenarios:

• You invite a fitness instructor who specializes in exercise for seniors to your facility to provide a class. During the class, one of your residents is injured while following the instructor’s guidance. Now, the resident is filing a lawsuit.
• You hire a third-party to cater an event at your facility. Some of your residents have food allergies, and you give the catering company this information. However, one of the dishes that is supposed to be nut free is contaminated with walnuts from another dish. One of the residents experiences a severe allergic reaction as a resu Now, the resident and her family are suing.
• You sometimes have group outings. You hire a shuttle to transport your residents to and from the location. The shuttle is involved in a crash and the shuttle driver is determined to be at fault. Several of your residents were injured in the crash and are suing. Plus, the driver of the other vehicle involved in the crash is suing for both property damage and injuries.
• Since some of your residents need ongoing physical therapy, you arrange for a licensed physical therapist to come to your facility. On one occasion, a resident is injured. He is now suing.

In all of these cases, you may think the other party is fully liable for injuries and property damage, meaning you have nothing to worry about – but that’s not necessarily true. Even though the other party is at fault, you could have some liability due to your relationship with the other party. Additionally, if the other party does not have sufficient insurance to cover the claims, the litigants may come after your facility.

Protecting Your Residential Care Facility from Third-Party Liability

Refusing to work with third parties isn’t the solution. Caterers, instructors, physical therapists, and other professionals can all improve the safety and well-being of your residents. You just need to be cautious when using their services.

• Vet the third parties you use. You need to vet third parties just as you do your new employees. Ask about training and experience, look at reviews, and ask for recommendations.
• Spell out liability in contracts. Don’t just assume other parties will be liable for any injury or damage they cause – use contracts that assign liability clearly.
• Require insurance. If something does go wrong, you need to know the other party will have sufficient insurance to cover the loss.
• Ask for a certificate of insurance. To verify that the agreed upon insurance coverage is in place, you need a copy of the certificate of insurance.

What Is a Certificate of Insurance?

According to Investopedia, a certificate of insurance verifies that an insurance policy is in place and summarizes the key aspects of the policy. A standard certificate of insurance will typically include the policyholder’s name, effective date, type of coverage, and limits, as well as other important details.

Importantly, it is the insurance carrier that issues the certificate of insurance. This means you’re not just taking the service provider’s word that coverage is in place and there’s no risk of misunderstandings about coverage: you’ll receive the pertinent information straight from the source – i.e., the insurer.

Why Is a Certificate of Insurance Necessary

If your contract states that insurance is necessary and both parties sign, do you need a certificate of insurance? Yes; it’s still a good idea for a few reasons.

• Proof provides peace of mind. Even if you trust the other party, it’s smart to have proof. Besides, trust has to be earned. Providing a certificate of insurance can go a long way in terms of earning trust.
• Terms may differ from what you agreed upon. Maybe the other party thought the difference was insignificant or didn’t know enough about insurance to realize. Regardless of the reason, if the insurance coverage does not meet the requirements you agreed upon, you need to correct these issues before there’s a claim.
• Coverage can lapse. You need to be able to confirm coverage is up to date. Having a current certificate of insurance provides evidence. Make sure you check the coverage dates.

Do You Have the Insurance Coverage You Need?

Requiring a certificate of insurance from every service provider you use is a smart way to reduce liability for your residential care facility and manage your risks. However, you still need your own insurance coverage. Tangram provides insurance for adult residential care facilities through the Personal Care & Assisted Living Insurance Center (PCALIC). Learn more.