Why Shouldn't You Rely on Certificates of Insurance As Proof of Additional Insured Coverage?
We've warned before about the recent dangers of relying on a certificate of insurance
as proof of your coverage as an additional insured. In the United Underwriters article, we wrote about the exclusionary language contained in a certificate insurance and its interpretation. In the recent case of Nautilus Insurance Co. v. Mona Fabrication et al., we again find the issue of a policy's interpretation regarding additional insured coverage.
In Nautilus, the court was confronted with the issue of whether or not a party not named as an additional insured in an endorsement could nonetheless be included as an additional insured where the endorsement also stated that additional insureds are those “as required by written contract and per certificate of insurance as approved and on file with the company” and a contract existed requiring the company be named as an additional insured but no certificate of insurance was on file with the insurance company.
Mona, along with the Muslim Community Center and others were sued in a personal injury action that occurred during construction on the Muslim Community Center. The Muslim Community Center along with others tendered to Mona's insurance company and the insurance company filed a declaratory judgment action seeking a ruling that it did not owe Muslim Community Center and others coverage or defense.
In assessing the policy language cited above, the court found that where there was no evidence that both an insurance certificate was on file with the insurance company and Mona was required to name the Muslim Community Center as an additional insured by contract, therefore the policy precluded coverage for the Muslim Community Center.
As we said before it's likely that the best policy is to make sure you're named in the endorsement. However, if the endorsement requires something as simple as contractual language stating that you should be named as an additional insured along with making sure a certificate is on file with the company, you should also ensure that a certificate is on file with the company and make sure your contractual language is sufficient.
It is becoming increasingly rare that an insurance certificate is found to be proof that one is actually covered as an additional insured under a policy. With a small amount of due diligence, this problem can be alleviated.
