Certificates of Insurance – Worthless Paper?

A certificate of insurance is, perhaps, the most misunderstood document in the insurance world – even more misunderstood than the insurance policy the certificates are designed to represent!

The certificate of insurance
…does not prove amounts of coverage available
…does not indicate the coverage in the policy
…does not prove policy conditions
…does not ensure additional insured status
…does not ensure notice of cancellation

A certificate of insurance is proof that an insurance policy was in existence on the day the certificate was issued. While the certificate will indicate that certain coverages are contained in the policies, coverage is solely determined by the insurance policy language – not certificate language.

The preamble to the certificate states:

“This certificate is issued as a matter of information only and confers no rights upon the certificate holder. This certificate does not amend, extend, or alter the coverage afforded by the policies below.”

In other words, it does not matter what is on this certificate. The coverage in the policy is the coverage in the policy. If the certificate indicates that there is an additional insured but the policy has not been amended, there is no additional insured.

The header for the coverage description section has a further disclaimer:

“The policies of insurance listed below have been issued to the insured named above for the policy period indicated. Notwithstanding any requirement, term of condition of any contract or other document with respect to which this certificate may be issued or may pertain. The insurance afforded by the policies described herein is subject to all the terms, exclusions and conditions of such.”

In fact, the above header language means that it doesn’t matter what other documents exist (leases, purchase and sales agreements, contracts) the insurance in the policy is what is in force.

On the back of the certificate form used by 99% of insurance agents is the following:

“IMPORTANT If the certificate holder is an ADDITIONAL INSURED, the policy(ies) must be endorsed. A statement on this certificate does not confer rights to the certificate holder in lieu of such endorsement(s).

“If SUBROGATION IS WAVED, 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).”

So, saying that a company is an additional insured on the certificate does not make it so. Further, statements about subrogation of claims are also not binding.

The last part of the back page shows the following:

“DISCLAIMER The Certificate of Insurance on the reverse side of this form does not constitute a contract between the issuing insurer(s), authorized representative or producer, and the certificate holder, nor does it affirmatively or negatively amend, extend or alter the coverage afforded by the policies listed thereon.”

The disclaimer attempts to remove all responsibilities of the issuing insurance agent. The language appears to try to eliminate any perception of authority.

Is the Certificate of insurance really worthless? No. It does show that a policy is in place. Certainly, agents try to be accurate in the descriptions of coverage indicated on certificates. However, you cannot use a certificate to prove coverage if the policy does not support the coverage described.

All that said, I still suggest my clients obtain certificates. In some cases it will save you premium at the time of a payroll audit as insurers accept certificates as proof of subcontractor coverage.

I have prepared a single page document that you can use to inform your vendors and contractors of your certificate requirement. Have your attorney review the document before you use it.