Don’t Fully Rely on the Certificate of Insurance; It Does Not Create Insurance Coverage

Construction contracts oftentimes use the term “Certificate of Insurance” in the context that a contracting party must provide their Certificate of Insurance demonstrating they are furnishing the contractually required insurance coverage. The Certificate of Insurance (also referred to as the“COI”) serves as proof of insurance coverage.

The problem with placing complete reliance on the Certificate of Insurance is that a Certificate of Insurance is not an insurance policy. It does not impose any obligation on the insurer.  It does not create insurance coverage.

By way of example, a general contractor hired a subcontractor for a high-rise commercial tower. After obtaining a judgment against the subcontractor for water damage and suing the subcontractor’s CGL insurer, the general contractor learned that the subcontractor’s CGL policy did not cover the subcontractor for structures in excess of three stories. In other words, the subcontractor had no CGL coverage for the commercial tower project. This perhaps would have been apparent if the insurance policy was furnished by the subcontractor upfront; it would not have been apparent through a Certificate of Insurance from the subcontractor. And, surely, had the contractor known that the subcontractor did not have CGL coverage, it would not have hired the subcontractor.

Further, if you are requiring a contracting party (such as a contractor or subcontractor) to name you as an additional insured, just because a Certificate of Insurance identifies you as a certificate holder or as an additional insured does not necessarily make it true. As mentioned above, a Certificate of Insurance is not an insurance policy and you would actually want the contracting party’s insurance policy and additional insured endorsement page to determine (a) that you are an additional insured and (b) that you are ideally an additional insured for both ongoing operations and completed operations.

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

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