Certificate of insurance – Your “winning ticket” for the tender
A certificate of insurance for Contractors All Risks insurance in the standard, uniform format approved by the Commissioner of Insurance is required by almost every party that takes part in construction projects: Public bodies such as the Ministry of Housing or the Israel Land Authority require property developers and contractors participating in government tenders to supply a certificate of insurance, as do various other government ministries in connection with projects being carried out for and/or in the framework of entities operating under their auspices, as well as public authorities, local authorities and the like.
The standard format certificate of insurance is tailored to the occupation and interest of the beneficiary who has requested the certificate, in accordance with the insurance cover codes appearing in the pre-defined list approved by the Commissioner of Insurance. The codes for the covers and extensions that the insured is required to arrange correspond to the type of work / service and the relationship between the insured and the principal.
These certificates are not only required by public institutions:
In the private sector – Certificates of insurance are also required by private entities taking part in initiating or executing projects who wish to protect themselves by obtaining an agreement from the insurance company to maintain insurance cover and confirm certain terms to them, a typical example of which is a certificate of insurance in favour of the developer from the building contractor.
Owners of National Outline Plan 38 projects involving reinforcement or demolition and rebuilding of residential buildings – who wish to protect themselves against third party claims as well as against damage to the works, the existing building, or the contents of the apartment will also demand a certificate of insurance signed by the insurance company of the developer / contractor. The same applies in the case of demolition and rebuilding projects, in which the owners of the apartments wish to protect themselves against claims against them in their capacity as owners, and also to guarantee their financial rights in the event of a loss during the course of the construction works.
Banks will also request a certificate of insurance before providing credit or project funding.
It is therefore clear that without providing a certificate of insurance in the standard format approved by the Commissioner of Insurance containing details of the policy and its extensions, it will be impossible to win a tender, finalise a deal or obtain credit.
To obtain a quotation for insurance cover tailored to your needs
Please contact me directly
Itzick Simon
972-50-5299480
Certificate of insurance – Better than the insurance policy itself!
In most cases, a standard format certificate of insurance is not only a document outlining principles but in fact substitutes the policy and its contents actually overrides the insurance policy if the insurance company includes any condition therein that contradicts the policy wording which has been requested by the beneficiary. There is no doubt that in order to obtain the “winning ticket” everything needs to be in order and the best way to do so is to obtain assistance from a professional insurance agent specialising in the construction industry.
Hereunder are several points of specific importance:
The main problem in the process
In most cases, a bidder in a tender gives an undertaking at the time of submitting the bid to supply a standard format certificate of insurance confirming compliance with the conditions shown in the insurance appendix attached to the tender, after winning the tender. In most cases the bidder does not bother to approach the insurance company at this preliminary stage of submitting a bid in the tender to obtain their confirmation or remarks on the wording of the certificate required and the conditions of the tender and its demands and the bidder confirms agreement to the conditions of the tender before ascertaining whether it is possible to arrange the insurance.
In such a case there are three possible scenarios:
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The insurance company creates difficulties – and so you need someone to conduct negotiations backwards and forwards with the insurance company and the principal and/or their insurance consultant in order to reach a compromise between the various parties. This process can take time, time that you don’t always have.
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The insurance company accepts the demands of the tender but demands exorbitant premiums to adapt the policy to the conditions of the tender which you might not necessarily be willing or able to pay since these insurance costs make the entire project uneconomical and unfeasible.
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The insurance company refuses to provide the cover – and as a result you have to withdraw from the tender with all of its implications, including forfeiture of the bid guarantee and the like.
We have the tools, the knowledge, the experience and the reputation with the insurance company underwriters to obtain certificates of insurance for you, to conduct negotiations with the tender acquirer, the authority or financial entity
You are welcome to call Itzick Simon directly on:
972-50-5299480
Please don’t hesitate to call!
The process of obtaining a certificate of insurance
In some cases a signed standard format certificate of insurance (in a pro-forma format) need to be attached to the tender bidding documents. In these cases it is easier for all parties involved: The insurance company, the principal, you and us – your service providers – since everyone knows exactly what is expected. The certificate constitutes a pro-forma document only even though its conditions have already been agreed in advance.
In these cases it is important to pay attention to the deadlines stated in the tender for submitting queries, exceptions or special requests that will be replied to within a specific timeframe – after which the tender bid document must be submitted without any amendment or exception.
However in most cases, the winning bidder in the tender will submit the standard format certificate of insurance only after winning the tender. The tender documents are submitted to the insurance company at this stage and only then will it raise any exceptions, exclusions and protection requirements, may delete the codes corresponding to certain clauses and amend wordings and the scenarios that the insurance company is unwilling to provide cover may effectively invalidate the insurance policy that the insured has already taken out. In such a case it is necessary to conduct intensive negotiations with the insurance company and also with the principal, if at all possible.
If there is a need to submit a standard format certificate of insurance to any other party such as a bank, or any other client and/or legal entity (such as a party to a joint venture) – an identical process will take place with such an entity as well.
This is the point where we emphasise the fact that the certificate of insurance and its content are more significant, from a legal perspective, than the insurance policy itself, a situation which results in the insurance company placing great importance on conducting negotiations concerning the clauses appearing in the standard format certificate and the way they are worded.
The insurance appendix and its significance
The standard format certificate of insurance in the tender bid documents is not the crux of the matter. The insurance appendix usually contains wordings (which are sometimes quite complex) and various important conditions concerning the scope of the policy required, the conditions for providing notifications in the event of the restriction or cancellation of the policy, payment of the premium, the status of the beneficiary and more.
In view of the above, the work of the agent and the underwriter is not merely a question of sending the standard format certificate of insurance to the insurance company to be signed, but rather devoting time to studying the insurance appendix in detail and identifying all of the requirements which are not included in the coverage codes, which need to be included in the policy wording itself.
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Important information concerning Ministry of Housing tenders
As part of the process of winning the tender, before and after the construction and until the full certificate of occupancy for the project is issued – the developer will need to provide a standard format certificate of insurance to the State of Israel – Ministry of Housing – Israel Land Authority.
This process involves several stages
Immediately after winning the tender, the developer will need to provide a pro-forma standard format certificate of insurance confirming the agreement of the insurance company to cover the project as soon as the site is handed-over.
The second stage, insofar as it relates to the insurance cover, creates another difficulty with everything we have stated so far.
Stage 05 – Hand-over of the land – defined by the Ministry of Housing as: Hand-over of the borders of the plot to the developer and handing-over the responsibility for the plot to the developer, subject to the developer providing a standard format certificate of insurance.
In other words – From the perspective of the Ministry of Housing, the date on which the land is handed-over to the developer for the construction is the time when a detailed certificate of insurance in the standard format must be supplied to the Ministry of Housing, confirming that the developer (which at this stage has only taken possession of the land and has not yet commenced their works), holds Third Party Liability insurance to cover property damage and/or third party property damage.
N.B.: In the past, the Ministry of Housing erred and demanded a certificate of insurance for full Contractors All Risks insurance at stage 05. This situation created a major problem for developers, since there is sometimes a gap of several months or years between the stage of handing-over the land and the stage when the construction starts, and developers were required to hold a Contractors All Risks insurance policy for which they have paid the premium before starting or even coming close to starting the works. This matter was resolved and since the beginning of 2023 the Ministry of Housing only requires Third Party Liability insurance from stage 05 – Hand-over of the land.
When the actual contract works at the site commence, the Ministry of Housing requires full Contractors All Risks insurance and a standard format certificate of insurance in accordance with the requirements appearing in the insurance appendix.
Certicates of insurance for turnkey contractors
A certificate of insurance is a precondition to winning tenders issued by governmental institutions, public authorities, municipalities and the like. This can create very serious difficulties for turnkey contractors since without the certificate – it will not be possible to win the tender. Another stumbling block is that the insurance company is not a rubber stamp! When the tender documents are sent to the insurance company, it will not necessarily agree to issue the certificate unless it is amended and various requirements and additional exclusions are added. The task of conducting negotiations and coordinating between the expectations of each party is exactly the reason why you need an expert and experienced insurance agent who will do the hard work for you.
Certicates of insurance for building contractors
Certificates of insurance are not required only for public and institutional tenders but also for tenders in the private sector. The principal can impose preconditions on the contractor to commencing the project including supplying valid insurance policies such as: Contractors All Risks, Professional Indemnity and Products Liability. A certificate confirming these policies or any other insurance policy required in the format of a certificate of insurance is a preliminary and important stage for the principal that precedes issuing instructions to the contractor to commence the works. The need for such a certificate…
Certicates of insurance for property developers
Certificates of insurance are not required only for public and institutional tenders but also for tenders in the private sector. The principal can impose preconditions on the contractor to commencing the project including supplying valid insurance policies such as: Contractors All Risks, Professional Indemnity and Products Liability. A certificate confirming these policies or any other insurance policy required in the format of a certificate of insurance is a preliminary and important stage for the principal that precedes issuing instructions to the contractor to commence the works. The need for such a certificate…
Certicates of insurance for banks or financial institutions
A certificate of contractor’s insurance policies is not required only by principals but also by banks and financial institutions who wish to ensure that any errors or omissions by the developer or the building contractor are not paid for by the bank and that the money they lend is secure and protected by a valid policy issued by an insurance company that covers all of the risks arising from the works. From the perspective of the bank – the policy is another ring of protection and security in the event of an untoward event. In the same way that the Ministry of Housing requires turnkey contractors participating in state tenders to provide certificates of insurance, so commercial banks require the same for projects in the private sector.