This is a relevant concern not only for any project owner or developer that requires a certificate of insurance from the prime contractor. Certificates of insurance are used so commonly as proof of insurance that they may tend to be a “check the box” item that just goes into the project file without a careful reading.

A certificate of insurance is generally a form document issued by an agent for a contractor’s insurance company to confirm that the company has issued a certain type of policy for certain policy limits. For example the certificate confirms that your contractor has a Commercial General Liability (CGL ) policy with the 3 million dollar limits your contract requires.  The certificate is supposed to be a summary.  It does not contain the terms of the policy.  It does, however, contain a disclaimer that the certificate is issued as a matter of information only and that the certificate confers no rights to the certificate holder.  It is not intended to amend, extend or alter the coverages set out in the policies themselves.

Assume you received the contractor’s certificate of insurance for your project. You checked that box.  So what could possibly go wrong?

First of all remember that the insurance identified in the certificate provides certain coverage to the named insured. That “insured” is not you, however, unless you are named as an additional insured.  Additional insured coverage means that as the certificate holder you may have the right to invoke coverage for defense or indemnity under that contractor’s insurance policy rather than your own. Additional insured coverage is not provided in the CGL policy.  It must be added, if at all, by an endorsement.  It shows up as a notation near the bottom of the Certificate.

Your certificate identifies you as an additional insured, but that may not be the end of the story. Not all additional insured endorsements are created equal.  Many have important limitations in just what coverage the additional insured gets.

When an injury or property damage happens you may discover that the additional insured coverage is not what it appeared. The coverage is usually no more and often less than the coverage the named insured has under the policy. It also matters when that damage occurred.  The usual CGL policy covers the named insured for bodily injury or property damage caused by the named insured during the course of the work.  That coverage ends once the work is completed.  If your occurrence comes after completion, the additional insured endorsement excludes coverage unless there is also an endorsement for completed operations. A notation of that endorsement should also show up on the certificate.   There may be other limitations on defense costs for the additional insured, or limits on liability to confirm to the underlying contract.

The author recalls a subcontractor CGL policy which had an exclusion for claims involving condominiums. Accordingly, the additional insured also had no coverage for condominiums.

But maybe that certificate does provide coverage despite the disclaimer. State court cases are appearing in which courts hold on particular facts that the insurance company is bound by the terms of its certificate of insurance even if that conflicts with the policy.  See T-Mobile USA v. Selective Ins. Co. of America, No. 96500, 2019 WL 5076647 (Wash. Oct. 10, 2019). Brown & Brown v Omni Metal, Inc. 317 S.W.3d 361 (Tex App-Houston[1st Dist] 2010)

Practice pointer to the certificate holder: if you are intending to rely on the coverage you asked for, you need to read the policy and endorsements to see just what you are getting and don’t overlook completed operations coverage.

Practice pointer to the insurance agent writing the certificate: make sure that the certificate is worded correctly when identifying additional insureds or referring to “all risk” coverage where the actual policy has limitations and exclusions.