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Fake Insurance Certificates – What Can You Do?

Fake Insurance Certificates – What Can You Do?

You are a contractor with a long list of contract requirements for your subcontractors. The most important item on that list besides tax forms is the insurance certificate. It is the one you have to chase some subs for, even resorting to withholding payment to get it.

Technology has made getting insurance certificates easier than ever. However, new advances also make it even easier to produce fraudulent certificates. Here are some ways to know if the certificate you’ve provided is valid, and how to prevent your business from receiving invalid certificates.

Anyone Can Fake A Certificate

Any business can pass off a fake certificate under the right (or wrong) circumstances, even subcontractors you may consider to be honest to a fault.  Things happen, and businesses may find themselves in a bind.  Consider these scenarios:

  1. A subcontractor that you’ve worked with before runs into money troubles. His insurance lapses due to nonpayment, but he needs the work, so he doctors an old certificate to look current.
  2. The employee of a former subcontractor goes out on his own and can’t afford insurance yet, so he uses a copy of the certificate from his former employer to provide proof of coverage. Just a few keystrokes on his computer and he’s suddenly “insured”. He’ll buy coverage when he can afford it.
  3. A subcontractor purchases a bare bones policy and doesn’t want to pay for those fancy extras like primary & noncontributory endorsements or an additional insured, so he takes the certificate from his insurance agent and adds that wording in after-the-fact to meet your contract requirements.

No one on that list is completely in the wrong, but this is an act of forgery, something that could be considered either a misdemeanor or a felony in many states. In California, forgery is addressed under Penal Code Section 470.

Here’s How You Can Tell

Now that you know someone you work with might be providing a falsified certificate, how can you tell if it has been faked? With today’s technology, it can be hard to determine. There ARE some signs, you just have to know what to look for:

  • Is the certificate in pretty bad shape, like it has been copied many times? It might have been falsified. Certificates today are often produced at the push of an insurance broker’s button, so you’ll get a fresh copy every time.
  • Do all of the fonts match up? Automated certificate systems will use the same font throughout the document. If the certificate holder information or the description of operations looks different from the rest of the document, it may be forged.
  • Does the certificate appear to have been whited out in certain areas (often a telltale “shadow” around an area in a document that has been copied). This is probably a forgery.
  • Is the name, address and phone number of the insurance broker provided on the certificate? Forged documents may omit some of the contact information to make the certificate harder to verify.

How to Verify A Certificate

Even if you have worked with a subcontractor many times in the past, it is always a good idea to verify the authenticity of a certificate before beginning work.  There are a few ways to do this:

  1. Use the WCIRB Workers Compensation Coverage search function. Please note that this will only verify workers compensation insurance.
  2. Contact the insurance broker to verify coverage. This can be done by phone or email, either of which should be listed on the certificate.
  3. Request that the certificate come directly from the insurance broker. Most insurance brokers will be happy to email certificates directly to your office.
  4. Request copies of endorsements be attached to the certificate to keep on file.

Why You Should Care About Fraudulent Certificates

Most job sites are safe and accidents don’t happen, but sometimes they do. Whether it is an injury to a subcontractor’s employee or damage to equipment, insurance will be necessary to pick up the pieces again.

If your subcontractor has provided a fraudulent insurance certificate you may think that means there isn’t coverage, but that isn’t true.  There may be coverage, but your insurance policies may be the policies providing it.  If your policy excludes the work of subcontractors, you may be paying out of your own pocket. Check with your broker to find out more.

You require insurance certificates from your subcontractors to minimize the risk to your own business from the acts of others. Verifying that the evidence of coverage is valid cannot wait until there is a claim, so it should be done as soon as the certificate is received.

Invalid insurance certificates are more than just a nuisance, it can cost your business money in insurance claims and higher premiums in the long run.  Talk to your insurance broker about ways to better protect your business from fraudulent certificates.

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