Any subcontractor who has ever worked has had to produce “proof of insurance” (or a certificate of insurance) at one time or another. A certificate is a snapshot of your current insurance coverage as it stands at the time it is issued. It should include information about your current limits of liability, insurance company that provides coverage, and the duration of the coverage. Many contracts also require that you add your client as an additional insured. This would enable you to have coverage that covers both you and your client in case of a claim. Your insurance company may not be able to subrogate against you client if you have an additional insured status. It is not common for an insurance company to subrogate against a contract party. An addition of insured status is nothing but a transfer or risk to another party. When you sign a contract that requires additional endorsements or certificates to be added to your coverage, problems can arise. This is especially true if you request these changes after the work is completed. Before you sign any contract, it is important that you carefully read it. Also, confirm with your insurer that you can meet the requirements of the contract.
Contracts often require you to meet one or more the following requirements: remove wording from the certificate, add specific forms and add general contractor/owner as additional insured. Your client wants to limit their liability. The insurance contract does not change if the general contractor/building owner is issued a certificate of insurance. As such, the Accord 25-01-08 certificate includes several statements that try to explain what a certificate does.
This certificate is only for informational purposes and does not confer any rights on the holder. This certificate does NOT modify, extend, or alter the coverage provided by the policies. “
“The following policies of insurance have been issued to the named insured for the indicated policy period. This certificate does not have to be issued to any other contract, document, or requirement. However, all insurance provided by these policies is subject to the exclusions, conditions, and terms of those policies. Paid claims may have reduced aggregate limits. “
The Certificate of Insurance, which is on the reverse of the form, does not create a contract between the issuing insurance(s), authorized representative, or producer and the certificate holder. It also does not affirmatively or negative amend, extend, or alter the coverage provided by the policies. “
An insurance policy is a contract between you and the insurance company. Any additional or deleted words on a certificate have no bearing on any potential claim. Certain contracts require that the phrase “this insurance policy is primary and not contributory” be included. A current CGL policy, with the appropriate endorsements, would provide primary coverage if your client has been added to the policy. Some people request that the words “endeavor mail” be removed. Most companies will only mail notice to those who have been added as additional insureds. Modifying a certificate is illegal in some states. Not to be forgotten is that the majority of case law supports that certificates are provided only for information and not part insurance contracts.
There may be requests to add specific forms to your policy. Insurance companies intentionally limit the coverage available to additional insureds in an effort to reduce liability. Your clients may request that you include outdated or inefficient forms to your coverage, either to get the coverage back or because they are ignorant. They usually ask to be added as an insured using form CG2010 11-85. This form provides coverage for “completed operations”. These forms may be incompatible with current liability policies and companies may not have permission to use them. Two forms are now required for the same thing: CG 2010 10-01, CG 2037 10-01.
Understanding the basics of what a certificate is will help you to meet your contractual obligations. Your policy will not be modified by a certificate of insurance. Your needs are not being met unless your policy has been changed (endorsed) by an insurance company. It is against the law in some states to amend or modify a certificate of insurance. Correct and current forms must be used. In most cases, your agent will be able to explain to your client why one particular form should be used instead of another. You should read your contract. Even though you have given an acceptable certificate and added your client to your policy, you could still be binding your client to something not covered by your general liability policy.