In 2018, I wrote an article about sending copies of certificates of insurance to insurers and copies of policy forms, especially additional insured endorsements, to additional insureds. Just recently I read a LinkedIn article from attorney Barry Zalma’s blog:
“Failure to Read Certificate Defeats Coverage for Additional Insured”
The article is about a federal court case in Louisiana, Progressive Paloverde Insurance Company v. Estate Of Bobby Jenkins, Et Al. where an additional insured was issued a certificate of insurance that listed the primary policy being provided as “non-trucking” coverage. The claim, of course, involved a trucking accident for which coverage was denied. The court ruled that the insurer could not be held liable for the additional insured’s failure to read the certificate and/or inquire about the meaning of “non-trucking.”
In 2013, in the case of Multicare Health System v. Lexington Insurance Company, a staffing company which had contracted with Multicare provided an ACORD 25 certificate of insurance that indicated a professional liability policy. The certificate did not mention that the policy had a $1M SIR. A $785K malpractice judgment was within the SIR and payable by the staffing company, but it had declared bankruptcy.
In the decision, the 9th federal circuit court said that it did not believe “that the Washington Supreme Court would find a duty to disclose a self-insured retention amount on a certificate that summarizes insurance policies and does not contain a column for retention or deductible amounts. This is especially true in light of the fact that the hospital could have asked [staffing company] for a copy of its insurance policy.”
There have been similar decisions upholding the obligation of an additional insured to read the applicable insurance contract language to determine the extent of the coverage provided to the additional insured. For example, in Admiral Insurance Company v. Cresent Hills Apartments, 328 F.3d 1310 (U.S. Ct. App. 11 Cir. 2003), the court cites Brooks Brown Ins. Agency, Inc. v. Harden, 236 Ga.App. 781, 513 S.E.2d 755 (1999) which opined
“…an insured has a duty to take certain steps for its own protection such as reading their policies, certificates of insurance or any cancellation notices in their possession.”
In Alabama Electric Cooperative, Inc., et al. v. Bailey’s Construction Company, Inc., Ala. Sup. Ct. (2006), citing various sources, the court said:
“An insured has a duty to read the insurance policy and is charged with knowledge of its provisions.”
“The Court concludes that [the client], claiming to be an additional ‘insured’ under [the policy], should be held to the same obligation as a named insured to review a policy of insurance on which it seeks to rely, and its reliance solely on the agent’s certificate of insurance is not reasonable under the circumstances….”
“Where an entity requires another to procure insurance naming it an additional insured, that party should not rely on a mere certificate of insurance, but should insist on a copy of the policy.” – Couch on Insurance (3d ed. 1997)
“Thus, the Court finds that Plaintiffs’ reliance upon [the insurance broker’s] representation of [the client’s] additional insured status was not reasonable. Accordingly, as a matter of law, Plaintiffs’ claims for negligent and fraudulent misrepresentation fail.”
This illustrates why, when issuing a certificate of insurance to an additional insured, it is usually a good idea to include relevant policy forms with the named insured’s permission. Astute additional insureds know this. This is possibly why a NY state government entity said, “If an entire insurance policy was submitted but not requested, [we] shall not be obligated to review the document and shall not be chargeable with knowledge of its contents.”
Similarly, a Georgia additional insured advised: “PLEASE DO NOT SEND ANY ENDORSEMENTS. We will only accept certificates with the additional insured statement listed above or as typed on the certificate.”
As I have preached in so many articles and presentations, do not add extraneous information on certificates. It’s usually better to provide the actual insurance contract language.
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Good article! I had not run into the public entities requesting that you NOT send coverage forms, which certainly muddies the waters for agents. A good guideline to remember is to attach the form EVEN IF THEY DON’T WANT IT in the same way we send Certificate copies to carriers, EVEN IF THEY DON’T WANT IT!