Allen Messer, CIC, CPCU
Allen brings technical skill, initiative, and experience to bear on the complex problems of insurance and risk management. He began his insurance career in March of 1971. Allen earned his CIC designation in 1977 and has been teaching for the Risk & Insurance Education Alliance since 1981. He also received the CPCU designation in 1981. He has worked for several different insurance companies in various capacities and has been involved in the independent agency system as a producer and agency owner.
If there were a list of the most misunderstood concepts in commercial insurance, Additional Insureds and Certificates of Insurance would compete for the top spot. Unfortunately, when they’re misunderstood, disappointment—and sometimes litigation—isn’t far behind.
The result? Misery awaits.
The Certificate isn’t the Coverage. MAYBE.
Let’s begin with the most common misconception.
A Certificate of Insurance (Certificate) is not an insurance policy. It is not a contract. It does not create coverage. It does not amend coverage. It does not guarantee coverage will exist when a claim occurs. Maybe. But some courts have decided otherwise!
A Certificate is simply a snapshot of information provided by the authorized representative on a particular date. It identifies policies that are in force at that moment and summarizes certain information. That’s all.
Yet countless project owners, landlords, lenders, general contractors, subcontractors, and others accept a Certificate believing it guarantees protection. It doesn’t.
The Certificate itself even warns us. Hidden in plain sight is language stating that the Certificate is issued for informational purposes only and confers no rights upon the Certificate holder.
Ignoring that warning is often where the misery begins.
“We’re Listed as Additional Insured.”
Really? Is that true?
Many organizations assume that because a Certificate says, “Additional Insured,” they have coverage.
Not necessarily.
Coverage depends on what the actual policy says, not what appears on the Certificate. The terms and conditions of the Additional Insured Endorsement, as well as those of the policy, determine the actual insurance coverage provided.
Questions that matter include:
- Was an Endorsement actually issued?
- Which Endorsement applies?
- Is it the correct required edition date?
- Is coverage automatic and conditional or scheduled?
- Is coverage limited to vicarious liability only?
- Is coverage limited to liability caused, in whole or in part, by the named insured or those acting on behalf of the named insured?
- Is coverage provided for the sole negligence of the Additional Insured?
- Are there any exclusions contained in the Endorsement that modify coverage?
Those answers aren’t typically found on the Certificate of Insurance. They’re found in the Endorsement and in the policy.
Contracts Create Expectations
Construction contracts, leases, service agreements, and vendor contracts routinely require Additional Insured status. Unfortunately, many contracts may simply state: “Provide Additional Insured coverage.” That sounds simple. It isn’t.
There are dozens of standard and non-standard Additional Insured Endorsements, each providing different terms, conditions, and limitations. Some are broad. Others are quite narrow. Some require that written contracts or written agreements be executed. Others limit protection to specific operations or locations.
The contract may promise far more than the insurance policy actually delivers.
Assumptions Are Expensive
Claims have a way of exposing assumptions:
- Everyone assumes that the Certificate was enough.
- Everyone assumes that the Endorsement exists.
- Everyone assumes that the policy responds.
Then the claim arrives. Coverage counsel becomes involved. Relationships deteriorate. Defense costs escalate. Finger-pointing begins.
The Certificate that everyone trusted suddenly becomes little more than a piece of paper.
Misery has arrived.
Risk Management Means Verification
Certificates should never replace verification.
Insurance professionals should:
- Review the actual Additional Insured Endorsement.
- Confirm the Endorsement matches contractual requirements.
- Review primary and noncontributory wording.
- Examine waiver of rights of recovery requirements.
- Look for notice of cancellation and non-renewal requirements.
- Confirm limits and policy periods.
- Understand exclusions that may eliminate expected protection.
The goal isn’t collecting Certificates. The goal is confirming coverage.
The Insurance Professional's Opportunity
This is where insurance professionals provide tremendous value:
- Rather than simply issuing Certificates, they educate clients.
- Rather than assuming contracts are satisfied, they verify.
- Rather than creating a false sense of security, they explain what the policy actually promises.
Clients rarely remember the Certificate that was issued. They always remember the claim that wasn’t covered.
Final Thoughts
Certificates of Insurance are important administrative documents. Additional Insured Endorsements are important contractual risk-transfer tools. But they are not the same thing.
Confusing one for the other is an invitation to costly surprises. The next time someone says, “We have the Certificate, so we’re covered,” pause before agreeing.
Because when assumptions replace verification…
Misery awaits.
