What Happens When Your Vendor's Insurance Policy Is Cancelled Mid-Term and No One Tells You

As a risk manager, how do you deal with this scenario?

Your Vendor (or a Subcontractor) is working on-site when an accident occurs. You're listed as an additional insured on their certificate of insurance, so you assume you're protected. Then you discover their GL insurance policy was cancelled weeks ago, and no one sent you a cancellation notice. Now you're defending a personal injury lawsuit on your own, without the Vendor's insurance coverage you thought you had. 

Are you now liable for the claim?

We asked Christopher A. Arcitio, Of Counsel at Kaufman Dolowich LLP in New York City, what happens legally when this scenario plays out:

A subcontractor submits a compliant COI to a general contractor. An accident involving a Sub's Truck happens - and the GC discovers that their Sub's Auto Liability policy was cancelled two weeks ago for non payment. What does the court say?

What the Law Says

"If a subcontractor's insurer validly cancels a subcontractor's policy, General Contractors can find themselves litigating personal injury lawsuits on their own, without the benefit of a subcontractor's insurance policy at play.

Would 30 Days Notice of Cancellation ensure you never have to deal with an accident while the sub's insurance was cancelled?

Not necessarily.

According to the New York Insurance Law requirements, insurance companies must mail a timely notice of cancellation to the insured and the insured's authorized agent or broker. However, they generally do not need to inform anyone else in order to cancel the policy - which includes a certificate holder. As a general contractor, this means that even if you were listed as a certificate holder and as an additional insured on a sub's COI, you may still be left with little to no relief against the subcontractor and the subcontractor's insurer(s).

New York courts may argue that the general contractor cannot rely upon the COI since "the policy was not in existence at the time of the accident" and, as such, there was no coverage under an insurance policy.

At least one New York court rejected an argument that a general contract should have been notified of a cancellation as an additional insured even after the subcontractor had a "courtesy" policy of notifying additional insureds of a cancellation. The court argued that the COI also stated that the insurer had no obligation or liability of any kind for the insurance company's alleged failure to mail a 30 days written notice.

What can you do, as a GC, to mitigate this risk:

• Require your subcontractors to provide notice, as soon as practicable, of any potential future cancellation of policies so that you can take steps to ensure the subcontractor's operations at the work site are covered with the applicable liability insurance policies.
• Ask the subcontractor's broker to include in the COIs that additional insureds should be put on notice ahead of a cancellation of a policy
• In reality, COIs may not be as detailed at the time of execution, especially when it comes to cancellation. Although COIs include a cancellation provision, such provision simply confirms the insurer will give notice in accordance with the policy provisions.
• Systems that detect insurance policy cancellations immediately as they occur, without relying on timely 30 Days notices would ensure GCs have viable subcontractors with legitimate insurance for risk transfer when personal injury accidents happen."

What This Means in Plain Terms

Insurers are only required to notify the policyholder and their broker when cancelling a policy. Certificate holders may receive no notice, even if they're named as additional insureds. By the time you discover the cancellation, it's often because an accident has already happened and you're facing a lawsuit without the coverage you expected.

Courts have made clear that a certificate of insurance provides no protection when the underlying policy no longer exists. The standard language on COIs explicitly states that insurers have no obligation to notify certificate holders of cancellations. Even vendors who voluntarily notify additional insureds aren't legally required to do so.

How Certificial Prevents Mid-Term Policy Cancellations From Becoming Uninsured Claims

Mid-term policy cancellations are just one example of why relying on static PDF COIs fails to keep you compliant between annual renewals. On average, an insurance policy changes 5 times per year:

• Equipment, vehicles, and locations get removed and added to Auto Liability policies
• Policies go into Pending Cancellation mode
• Policy limits get reduced, making a previously compliant COI ($5M CGL limits) no longer compliant (downgraded to $2M CGL limits)

All these scenarios highlight the same problem: creating a false sense of compliance. A certificate showing valid coverage can become completely invalid within days, and traditional tracking systems have no way to detect these changes until you manually request renewal months later.

How Certificial's Smart COI Technology Works

Smart COIs are living documents connected directly to insurance policies in the insurance agent's system. Unlike traditional PDFs that become outdated the moment they're issued, Smart COIs reflect the current state of coverage at all times.

Certificial's technology connects directly to insurance agents' management systems (AMS). When an agent makes any change to a policy, whether it's a cancellation, a limit reduction, or removing a vehicle from an Auto Liability schedule, that change appears in your Certificial account within seconds.

This connection operates automatically and continuously. You're not waiting for agents to remember to send updated certificates or relying on carriers to mail 30-day cancellation notices. The moment coverage changes in the agent's system, you see it in yours.

What Smart COIs Monitor in Real-Time

Traditional COI tracking stops at expiration dates. Certificial monitors every meaningful change to your vendor's insurance policies:

Policy-level changes: Cancellations, pending cancellations, coverage limit reductions, and renewals all trigger instant alerts to your team.

Schedule-level verification: Certificial tracks specific assets covered on policies. When a vendor removes a vehicle (by VIN), a piece of equipment (by serial number), or a location from their policy, you're notified immediately. This matters because a vendor can maintain an Auto Liability policy while removing the specific truck working at your site from coverage.

Certificate holder and additional insured status: If your company gets removed as a certificate holder or additional insured during a policy change or renewal, Certificial flags this immediately.

Coverage requirement compliance: The system continuously compares actual coverage against your requirements. When limits drop below thresholds or required endorsements disappear, automated workflows notify both your team and the vendor.

Results: Continuous Insurance Compliance Between Annual Renewals

PowerFlex saved 2-3+ hours per week on manual follow-up while increasing compliance from baseline to 94%.

A transportation client moved from 82% to 98%+ compliance and reassigned 3-5 full-time employees per distribution center to other work.

These improvements happen because Smart COIs eliminate the verification gap that makes traditional tracking fail. You're not hoping vendors notify you of changes or trusting that carriers send cancellation notices on time. You have direct visibility into policy status that updates automatically, giving you time to halt work, require new coverage, or make other arrangements before an incident occurs.

Ready to see Certificial in action?

Learn more about Certificial and request a demo here.

Christopher A. Arcitio is Of Counsel in the New York City office of Kaufman Dolowich LLP and focuses his practice on commercial litigation, professional liability, general liability, and insurance coverage and litigation, and his work includes providing a defense on behalf of insurance carriers for construction accidents. His work includes analyzing whether recent lawsuits alleging fraud and violations of the Racketeer Influenced and Corrupt Organizations known as “RICO”  Act for staged and fabricated personal injury accidents in New York City. He can be reached at Christopher.Arcitio@kaufmandolowich.com.

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