Is Your Contractor's or Subcontractor's Certificate of Insurance Worthless?
If you look closely at your contractor's or subcontractor's certificate of insurance, you're likely to find a disclaimer that reads something like this:
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.
Normally, the certificate of insurance is produced specifically for the purpose of demonstrating that a particular party is a "certificate holder" or "additional insured." But the very document itself has a boldfaced disclaimer that the certificate cannot be relied upon.
This begs our question: Is the certificate of insurance worthless?
Legally Speaking...Yes
It will be the burden of the insured (or the party claiming coverage) to prove the existence of a policy and coverage. Tunstall v. Stierwald, 809 So.2d 916 (La. 2002).
There is clear case law that reliance on certificates of insurance may be easily misplaced. In T.H.E. Insurance Co. v. City of Alton, for example, the US 7th Circuit held that a party "could not simply rely on the certificate [of insurance] for the terms and conditions of coverage." 227 F.3d 802, 806 (2000).
A certificate of Insurance is not an insurance policy, and the certificate itself is not ordinarily issued by the insurance company. Simply speaking, a party claiming coverage will likely not meet its burden of proving insurance coverage by pointing to a certificate of insurance only.
So, How Do You Confirm Insurance?
Our friends in Mississippi who run the Construction Law Toolbox blog posted last week asking "Can I Rely On My Subcontractor's Certificate of Insurance?" They provide a good analysis of the problem with certificates of insurance in their article, and they offer a "best practices'" for those in the construction industry:
The best business "policy" is to always obtain and read the actual insurance policy itself. In reviewing the policy, take into consideration the circumstances related to each particular project.
While this is more difficult than the ordinary receipt and filing of your contractor's or subcontractor's certificate of insurance, it's the only way to confirm that the insurance policy required by your contract has been properly provided.
Options If You Have a Certificate, But No Insurance
What to do if you have a Certificate of Insurance...but no actual insurance?
While you may not have a perfect claim against the insurer, you have a number of alternative claims. Some example claims: A suit against the insurance agency for negligent or intentional misrepresentation, or for errors and omissions, or a suit for breach of contract against the person or entity who was required to provide insurance.
These claims may expire quickly, so if you a certificate of insurance (but, no actual insurance), it's important to promptly seek the advice of counsel.
