Certificates of insurance: do they accurately summarize the policy?

Certificates of insurance pose major problems for all parties – the insurance company, agents, and the insured. A certificate of insurance is a document that provides a description of coverage contained in a specific insured’s policy. Typically, a certificate is provided to a third party as proof that coverage exists as required by an agreement, contract, or transaction. Such requirements are particularly common in construction contracts with large contractors, major corporations, and governmental entities.  

However, a certificate rarely tells you anything about an insured’s coverage. The best (and potentially only) method to determine compliance is by reading the policy and its endorsements. Because most parties mistakenly rely on the certificate instead, this leads to issues such as (1) improperly identifying additional insureds; and (2) misrepresenting coverage on the certificate that doesn’t actually exist. 

One of the most common problems with certificates of insurance is when certificate holders are listed as additional insureds on certificates without the policy actually reflecting that. As a general rule, when policy language conflicts with the certificate of insurance, the policy language will govern; certificates cannot modify coverage or change the terms of the insurance contract. Certificate holders should be aware that some insurance agents may mistakenly or intentionally issue certificates that do not reflect coverage or policy terms. Therefore, certificates should never be relied on as a substitute for insurance. The only way to know whether there is proper coverage is to review the insurance policy.

Another issue commonly arises from arduous insurance requirements of the contract. Many insurance requirements of large contractors, corporations, and governmental entities cannot be met by coverage available in the marketplace. For example, a contract may require specific endorsements, which the insurer cannot legally provide because they have been superseded by new editions or withdrawn. As a result, agents are sometimes asked to produce a certificate that cannot comply with the contract the insured has already signed. This can lead to the issuance of fraudulent certificates by either insureds or agents.

Insureds need to know that certificates are simply snapshots of policy coverage. Too often, the policy does not satisfy the coverage required by the contract. If coverage is not available, negotiate such requirements from the contract. Insureds should consult an attorney to review the contracts and insurance specifications required on their behalf to identify what requirements may be impossible or difficult to insure and what coverage is actually sought and provided.