- Risk Busters Additional Insured Coverage And The Peril of Relying On Certificates of Insurance
- June 13, 2014 | Author: Matthew M. Hennesy
- Law Firm: Barley Snyder - Lancaster Office
One way owners and contractors can help manage the risks inherent in a construction project is by requiring that downstream contractors and subcontractors add them as an additional insured under their liability policies. Being added as an additional insured will provide owners and contractors with an additional layer of insurance. Additional insureds should understand the scope of coverage provided by the policy, including the relevant coverage exclusions. While an insurer has a duty to defend and cover claims made against additional insured, it will only do so if those claims are covered (and not subject to an exclusion) by the insurance policy.
Using additional insured language in a contract is only the first step. Owners and contractors must make sure that they are actually added as additional insured. Certificates of insurance will often be provided as evidence that an additional insured has been added to an insurance policy. Certificates of insurance by themselves, however, are inadequate to demonstrate that an owner or contractor has been added to a policy as an additional insured. Owners and contractors that choose to rely solely upon a certificate of insurance to verify their status as an additional insured, are taking a huge risk. Certificates of insurance are often issued by third parties and provide a snapshot of coverage that exists at the time they are issued. They do not identify policy terms, exclusions, or subsequent changes to the policy.
The addition of a company on a certificate of insurance as an additional insured does not make that party an additional insured under the insurance policy. Most certificates of insurance include a disclaimer stating that “this certificate is issued as a matter of information only and confers no rights on the certificate holder,” or something similar. Courts have relied on those disclaimers as a basis to totally ignore certificates of insurance when determining whether an owner or contractor is an additional insured under a policy. What matters is who is included on the policy as additional inured. Where the policy and certificate of insurance conflict, the statement of additional insureds on the policy will prevail. When owners and contractors require that their downstream contracting parties include them as additional insured, they verify completion of that contract term by requesting a copy of the policy endorsement making them an additional insured.