• Certificates of Insurance: So You Like to Gamble?
  • August 22, 2006 | Author: Collin J. Hite
  • Law Firm: McGuireWoods LLP - Richmond Office
  • It never ceases to amaze coverage lawyers the risk policyholders take by relying on Certificates of Insurance as the sole source of evidence that the other party to a contract has required insurance. Even riskier are those who rely upon these pieces of paper as evidence that someone is an Additional Insured. Let’s face it; your odds are better at a blackjack table.

    For some reason, the business community believes that Certificates of Insurance are ironclad proof that another entity either has the purported insurance coverage, or worse, has added the company as an Additional Insured. Many lawyers, and a number of courts, will tell you that these certificates are not worth the paper they are printed on.

    Generally, these documents are mere evidence of the insurance coverage the policyholder has at the very moment the certificate is issued. Remember, insurance companies almost universally do not issue these certificates, and many times do not know they have been issued. If the insurance is cancelled the next day, the certificate is meaningless.

    Even more dangerous are companies that rely upon these documents as proof that they have been added as an Additional Insured to another’s insurance policy. The standard ISO form states that the certificate cannot extend or alter the coverage. The normal procedure requires the broker to submit a request to the insurer to add an entity as an Additional Insured, which then endorses the policy. Without the endorsement, your chances of being an Additional Insured are slim, regardless of what your contract may require or what the certificate may say. In short, the only safe thing is to demand to see the policy and endorsement.

    There are many ways a company can prevent being a Wild West gambler through proper drafting of contracts and the requisite level of follow up. McGuireWoods’ Insurance Coverage Counseling and Litigation Group advises clients on instituting proper procedures to ensure that contractors, subcontractors, and others have the required insurance, and pursuing coverage through litigation when appropriate.