Certificates of Insurance: Do They Matter?
All too often after a lawsuit is filed our clients come to us and say, “We required the contractor to name the association as an additional insured and obtained proof of insurance by requiring them to submit a certificate of insurance,” why then are we not covered by the contractor’s policy? The truth is, a certificate of insurance has little to no value if that is all you are requiring to show proof of insurance and additional insured coverage. This issue has become far more serious recently as carriers have insisted on added-insured endorsements that significantly limit coverage.
A certificate of insurance is typically a one-page document that identifies the insured (i.e. the vendor/contractor), the insurer issuing the policy, the types and limits of coverage, and the entity requesting the certificate (i.e. the certificate holder). It is similar to an automobile insurance identification card you are required to keep with your vehicle. It shows that somewhere, at some time, an insurer issued the insured an insurance policy. That is all it is meant to convey.
If you rely only on a certificate of insurance, you are left with a false sense of security since it is not proof that your association is actually named as an additional insured; and, if it was named as an additional insured, whether the exclusions to coverage that may apply limit the association’s protections under such policy. Simply put, depending on the type of added-insured endorsement provided by the carrier, additional insureds do not receive the same type and extent of coverage as a named insured. Another problem with certificates of insurance is that they can be easily forged. For example, an insured could obtain a certificate of insurance for one project and fraudulently edit the form for another. However unlikely that may seem, it is just as easy for an insured to provide you with a certificate of insurance for a policy that has since been cancelled.
While it may come as a surprise to many, nearly every certificate of insurance advises the certificate holder that the certificate does not convey any rights on the certificate holder:
THIS CERTIFICATE IS ISSUED AS A MATTER OF INFORMATION ONLY AND CONFERS NO RIGHTS ON THE CERTIFICATE HOLDER. THIS CERTIFICATE DOES NOT AMEND, EXTEND OR ALTER THE COVERAGE REPORTED BY THE POLICIES DESCRIBED BELOW.THIS CERTIFICATE OF INSURANCE DOES NOT CONSTITUTE A CONTRACT BETWEEN THE ISSUING INSURER(S), AUTHORIZED REPRESENTATIVE OR PRODUCER, AND THE CERTIFICATE HOLDER.
IMPORTANT: If the certificate holder is an ADDITIONAL INSURED, the policy(ies) must be endorsed. If SUBROGATION IS WAIVED, subject to the terms and conditions of the policy, certain policies may require an endorsement. A statement on this certificate does not confer rights to the certificate holder in lieu of such endorsement(s).
Stated differently, the mere issuance of a certificate of insurance is not enough to confer additional insured status on the certificate holder. In addition to the problems discussed above, insurance policies are filled with exclusionary language and definitions of “additional insured” that are designed to exclude or limit coverage to those other than the primary insured. Thus, it is critical that your association confirm that it has actually obtained appropriate additional insured status.
To obtain additional insured status, there must be a contractual agreement between the insurer and the insured, which is reflected by an endorsement to the policy. Without an endorsement, there is no right to additional insured coverage – regardless of what the certificate of insurance may indicate. Accordingly, it is important that associations require vendors and contractors to provide: (a) a certificate of insurance that identifies the particular additional insured endorsement obtained for the association; (b) a copy of the endorsement itself; and, (c) a copy of the policy. There are several forms of added-insured endorsements that vary widely in the extent of coverage provided. While it is possible that you would be denied the policy, you at least put the association in a position to argue for coverage if you obtain an inaccurate or incomplete certificate of insurance or endorsement.
If you take only one thing away from this article, it should be that obtaining an additional insured endorsement from your vendors and contractors is a must. Even if you obtain a certificate of insurance listing the particular additional insured endorsement obtained, that is not sufficient proof of additional insured coverage. The certificate of insurance is ultimately issued for informational purposes only and cannot be relied upon to determine or enforce coverage. Further, your insurance agent is an excellent source to tap to review the actual form of added-insured coverage provided.
Becker strongly recommends that you consult with an attorney and your insurance agent whenever dealing with issues pertaining to contracts and insurance coverage. If you have any questions, or would like to speak with an attorney, please feel free to contact us.