Certificates of Insurance and the Headaches they Cause

Ronald Hicks, CIC, CRISBollinger Insurance

Construction Practice Group

What is a Certificate of Insurance?

• A Snapshot of the existing insurance policies in place.– Acord 25 – Certificate of Liability Insurance

• General Liability / Professional Liability• Auto• Workers Compensation• Umbrella• Miscellaneous Coverage (Pollution)

– Acord 24 – Certificate of Property Insurance

What is Included on a Certificate

• Information Provided– Agent– Insurance Carrier(s)– Business Name– Certificate Holder– Limits– Effective Dates– Other Misc Pertinent info

What is Included on a Certificate

• Cancellation Provision• Open information box which can include

– Description of operations– Exclusions & Endorsements– Special Provisions

• Authorized Representative of the Carriers’ Signature

• Edition Date & Copyright Date

What is Included on a Certificate

• Qualifying Statement about the Certificate

• Qualifying Statement about the Insurance Policies in Effect

• Cancellation Provision

Qualifying Statement about the Certificate

– Versions Prior to 2009 Version

• THIS CERTIFICATION IS ISSUED AS A MATTER OF INFORMATION ONLY AND CONFERS NO RIGHTS UPON THE CERTIFICATE HOLDER. THIS CERTIFICATE DOES NOT AMEND, EXTEND OR ALTER THE COVERAGE AFFORDED BY THE POLICIES BELOW.

Qualifying Statement about the Certificate

– 2009 Version• THIS CERTIFICATION IS ISSUED AS A MATTER

OF INFORMATION ONLY AND CONFERS NO RIGHTS UPON THE CERTIFICATE HOLDER. THIS CERTIFICATE DOES NOT AFFIRMATIVELY OR NEGATIVELY AMEND, EXTEND OR ALTER THE COVERAGE AFFORDED BY THE POLICIES BELOW. THIS CERTIFICATE OF INSURANCE DOES NOT CONSTITUTE A CONTRACT BETWEEN

Qualifying Statement about the Certificate (Cont.)

– 2009 continued

• THE ISSUING INSURER(S), AUTHORIZED REPRESENTATIVE OR PRODUCER, AND THE CERTIFICATE HOLDER

Qualifying Statement about the Insurance Policies

• THE INSURANCE AFFORDED BY THE POLICIES DESCRIBED HEREIN IS SUBJECT TO ALL THE TERMS, EXCLUSIONS AND CONDITIONS OF SUCH POLICIES. AGGREGATE LIMITS SHOWN MAY HAVE BEEN REDUCED BY PAID CLAIMS.

Cancellation Provision

• SHOULD ANY OF THE ABOVE DESCRIBED POLICIES BE CANCELLED BEFORE THE EXPIRATION DATE THEREOF, THE ISSUING INSURER WILL ENDEAVOR TO MAIL ___ DAYS WRITTEN NOTICE TO THE CERTIFICATE HOLDER NAMED TO THE LEFT, BUT FAILURE TO DO SO SHALL IMPOSE NO OBLIGATION OR LIABILITY OF ANY KIND UPON THE INSURER, ITS AGENTS OR REPRESENTATIVES

Cancellation Provision

• New Wording for 2009– Should any of the above described policies be

cancelled before the expiration date thereof, notice will be delivered in accordance with the policy provisions.

Reasons forCertificate Requests

• Proof of in force Coverage & Limits• Mortgage Interest (not a valid reason)• To show proof that policy has been

endorsed to expand coverage to another party, aka “additional insured”

Workers Compensation Section

• ANY PROPRIETOR /PARTNER/ EXECUTIVE OFFICER/ MEMBER EXCLUDED?– Who can be excluded?– What does it mean if they are excluded?– The box is often left blank

• This is the single most overlooked part of a certificate.

What a Cert does not do

• What claims are outstanding eroding the limits of insurance

• Financial Rating of Insurance Carrier• Standard vs. Surplus Lines Carrier• Usually will not provide limiting

endorsements and exclusions.

Illegal Requests

• Requirement to Strike out– ENDEAVOR TO

– BUT FAILURE TO DO SO SHALL IMPOSE NO OBLIGATION OR LIABILITY OF ANY KIND UPON THE INSURER, ITS

AGENTS OR REPRESENTATIVES • ACORD 25 is a copyrighted document in which

permission is granted to print, reproduce, and fill in– Permission is not granted to alter the ACORD 25– Some states require forms to be approved before they can

be used.

Uninsurable requests

• In the description box– "any and all claims“

• The standard General Liability (GL) policy is designed to pay for claims related to Bodily Injury, Property Damage.

• The GL policy is not designed to pay for liquidated damages, delay claims, etc. and therefore do not belong on an insurance certificate.

Additional Insured Issues

• Additional Insured edition CG 20 10 (1985 version or equivalent).– 1985 Version includes

• Ongoing operations• Completed operations (silently with no expiration)• Much broader coverage trigger than current

versions

CG 20 10 (1985 Version)

• WHO IS AN INSURED is amended to include as an insured the person or organization shown in the Schedule, but only with respect to liability arising out of "your work" for that insured by or for you. – (This is the whole endorsement)

CG 20 10 (Current Version)

• for "bodily injury", "property damage" or "personal and advertising injury" caused, in whole or in part, by:– 1. Your acts or omissions; or– 2. The acts or omissions of those acting on

your behalf

• Explicitly excludes completed work or work put to intended use.

Completed Operations

• Who Is An Insured is amended to include as an additional insured the person(s) or organization(s) shown in the Schedule, but only with respect to liability for "bodily injury" or "property damage" caused, in whole or in part, by "your work" at the location designated and described in the schedule of this endorsement performed for that additional insured and included in the "products-completed operations hazard"

CG 20 10 & CG 20 37

• Additional Insured’s must be listed on the endorsement– A new endorsement needed for each new

additional insured to be added

• No restriction regarding other insurance coverage – (silently making the additional insured primary

and noncontributory)

Blanket Additional Insured

• Automatic status when required in a written construction agreement.– Advantage

• Can purchase as a annual endorsement rather than pay for each issued additional insured.

– Disadvantage• Excludes Completed Operations

Company Specific Blanket Form

• Beyond the CG 20 33, there is no standard blanket additional insured endorsement.– Most companies offer a blanket additional

insured form for both ongoing and completed operations.

• The form is usually worded in a similar fashion regarding trigger.

Company Specific Blanket Form(cont)

• Major concerns regarding coverage limitations in the company specific blanket additional insured.– May not be primary and non-contributory.– May have a limit on the amount of coverage

available.– May not allow for AI beyond one tier up.

• Are your Subs’ subs naming the GC as AI?

Binder vs. Certificate

• THIS BINDER IS A TEMPORARY INSURANCE CONTRACT, SUBJECT TO THE CONDITIONS SHOWN ON THE REVERSE SIDE OF THIS FORM.

So how do I protect myself?

• Upper Tier Contractors and Owners– Workers Comp

• Look at NJCRIB.com for coverage and owners opt in/out

– General Liability• Better Contractual Language requiring

– Waiver of Subrogation– Primary and non contributory– Adjust the limits of insurance required by contract to

reflect the limits of insurance provided by the sub

So how do I protect myself?

• Upper tier contractors and owners (cont.)– Require a copy of the additional insured

endorsement to be included with the certificate

– Accept Certificates ONLY from the agent

How do I protect myself

• Subcontractors– Use the same principles as above for your

subs ALWAYS and CONSISTENTLY

– Understand what your blanket additional insured endorsement says and what the limitations are.

How do I protect myself

• Subs (cont)– Ask a contract to be revised to conform with

the requirements of the certificate.• If it requires a written contract, get one.• If it requires that the contract state “primary and

noncontributory” amend it accordingly.– At the end of the day, you want the insurance carrier to

pick up your defense obligations.

– Push back on requests that are uninsurable.

Examples

Ronald Hicks, CIC, CRISBollinger Insurance

856-866-3240Ron.hicks@bollingerinsurance.com