Certificates of Insurance are documents provided by Agents to verify the existence of insurance coverage. They are commonly used when an agreement or contract requires a party to maintain specific types of insurance. For example, a Certificate of Insurance can be used when:
- A general contractor wants to verify that its subcontractor has the statutorily required workers’ compensation insurance;
- A mortgage lender wants to verify that the homeowner has sufficient property insurance;
- A commercial landlord wants to verify that its tenant has all the insurance coverage required by the lease; or
- A homeowner wants to verify that its lawn service company has general liability insurance.
Certificates of Insurance are issued to the certificate holder—the person or entity that needs to verify insurance coverage. Though common and relatively straightforward, there is quite a bit of confusion about what Certificates of Insurance do, and more importantly, do not do.
A Certificate of Insurance provides a superficial snapshot of insurance coverage that is in place at the time it is created. Contrary to what many believe, Certificates of Insurance:
- Are NOT insurance policies.
- Do NOT provide certificate holders with any rights under the insured’s policies. This means certificate holders cannot file a claim or request a defense under the insured’s policies.
- Do NOT amend, extend or alter the coverage provided by the insured’s policies. This can only be accomplished with an endorsement, rider or amendment to the policy.
- Do NOT create a contract between the insurance company and the certificate holder.
- Do NOT guarantee that insurance coverages listed on a Certificate of Insurance will continue in the future. A Certificate of Insurance issued today may not be accurate tomorrow.
- Are provided for informational purposes ONLY.
Though there are various Certificate of Insurance forms, those developed by ACORD (Association for Cooperative Operations Research and Development) are widely used to provide specific information about existing insurance coverage, such as:
- the insurance companies issuing the policy
- the policy numbers
- effective dates
- types of insurance (ex. general liability, automobile, workers’ compensation, property)
- policy limits
These forms also provide a space to add additional comments or conditions. This is where problems may arise if an insured or certificate holder wants to add specific language to their Certificates of Insurance. For example, a certificate holder may want to state that there is an additional insured under the policy, or an insured may want the certificate to state that any obligation to indemnify the certificate holder is covered by the policy.
If such statements happen to be true, it is not because they were typed on the certificate. Remember that Certificates of Insurance do not affect, extend, or change the insurance policy, so any incorrect or contradictory statements are meaningless to the insurance company. They can, however, be grounds for a costly lawsuit, so an experienced insurance agent should be used when issuing or receiving Certificates of Insurance.
If you would like to learn more about dealing with Certificates of Insurance or how we can help, please contact us.
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