Consider a hypothetical situation. Company A contracts with Company Z to perform construction work at A’s facility. By the terms of the contract, Z agrees to add A as an additional insured on its general liability policies. Z then provides A with a certificate of insurance that identifies A as an “additional insured,” and A allows Z to begin work. Not long after, an employee of Z is injured on the job and brings suit against A, at which time A learns a shocking truth: Despite the fact that a certificate of insurance was issued, A was not added as an additional insured on Z’s policy. What now?
Unfortunately, this hypothetical situation is an all-too-common reality. Certificates of insurance (“COI”) are often used in contracting relationships to prove that a party has insurance or to demonstrate that one party has named the other as an additional insured (as is often required by a contract). A COI—which details the insurance policies that are maintained by an insured as of a certain date—typically identifies the policy number, the policy holder, the insurance company, the policy period, the type of insurance, the policy’s liability limits, and the identity of additional insureds, if any.
New York courts generally view COIs as “evidence of a carrier’s intent to provide coverage but … not [as] a contract to insure the designated party nor … [as] conclusive proof, standing alone, that such a contract exists.” Tribeca Broadway Assocs., LLC v. Mount Vernon Fire Ins. Co., 5 A.D.3d 198, 200 (1st Dep’t 2004). Indeed, some New York courts have held that a COI, by itself, does not confer coverage, e.g., id., and parties should be particularly wary where the COI includes some variation of the following disclaimers:
- This certificate does not amend, extend, or alter the coverage afforded by the policies below;
- This certificate is issued as a matter of information only and confers no rights upon the certificate holder; and
- If the certificate holder is an additional insured, the policy(ies) must be endorsed … [a] statement on this certificate does not confer rights to the certificate holder in lieu of such endorsement(s).
Notwithstanding the general rule that a COI does not “confer” coverage, the New York Appellate Divisions are split on the issue of whether an insurance company may be estopped from denying coverage on the basis of a COI. The Third and Fourth Departments have consistently held that, despite a disclaimer in the COI, an insurer may be estopped from denying coverage to a party named as an additional insured on a COI where the party reasonably relied upon the COI to its detriment. See, e.g., Sevenson Envtl. Servs., Inc. v. Sirius Am. Ins. Co., 74 A.D.3d 1751 (4th Dep’t 2010); Long v. Liberty Mut. Ins. Co., 56 A.D.3d 837 (3d Dep’t 2008) (insurer estopped from denying obligation to pay workers’ compensation benefits); Bucon, Inc. v. Pa. Mfg. Ass’n Ins. Co., 151 A.D.2d 207 (3d Dep’t 1989).
In Bucon, for example, a subcontractor contractually agreed to add the general contractor and the property owner as an additional insured on its general liability policy. The insurer issued a COI naming the contractor and owner as additional insureds. The general contractor and owner were subsequently sued by an employee of the subcontractor who was injured while working on the project. The insurer denied coverage, relying on language in the COI stating that it did not “amend, extend, or otherwise alter the terms and conditions” of the policy. Notwithstanding this disclaimer, the Third Department held the insurer was estopped from denying coverage because it issued the COI indicating the contractor and property owner were covered, and the contractor and owner reasonably relied on the COI to their detriment in allowing the subcontractor to begin work.
In Sevenson Environmental Services, Inc., the Fourth Department acknowledged that an insurer could likewise be estopped from denying coverage to a party that reasonably relied on a COI to its detriment. However, as an added wrinkle for estoppel to apply, the COI naming the party as additional insured must have been issued by the insurer
or an agent of the insurer. Since the plaintiffs did not meet their burden of establishing that the COI was issued by the insurer or an authorized agent, the Fourth Department ruled that it was error for the lower court to grant that portion of the plaintiffs’ motion for summary judgment seeking a declaration that the insurer was obligated to defend and indemnify the plaintiffs.
The First and Second Departments, on the other hand, have been reluctant to estop an insurer from denying coverage based on the existence of a COI. See, e.g., Moleon v. Kreisler Borg Florman Gen. Constr. Co., 304 A.D.2d 337 (1st Dep’t 2003); Am. Ref-Fuel Co. of Hempstead v. Res. Recycling, Inc., 248 A.D.2d 420 (2d Dep’t 1998). Interestingly, a recent decision from the Supreme Court of New York County (located within the First Department) acknowledged the possibility that, where an insurer’s agent issued a COI naming the certificate holder as additional insured, the insurer “may be estopped from denying coverage where there is reasonable reliance to the detriment of the certificate holder.” Sw. Marine & Gen. Ins. Co. v. Preferred Contractors Ins. Co., No. 153861/2014, 2015 NY Slip Op. 30544(U), at *11 (Sup. Ct. N.Y. Cnty. Apr. 13, 2015).
In any event, it is important to note that, where there is no coverage under an insurance policy because the policy was not in existence at the time of the accident, estoppel cannot be used to create coverage. See Wainwright v. Charlew Constr. Co., 302 A.D.2d 784, 785 (3d Dep’t 2003).
In recognition of the Appellate Divisions’ split on the issue of estoppel, the Second Circuit Court of Appeals, in 10 Ellicott Square Court Corp. v. Mountain Valley Indemnity Co., certified the following question to the New York Court of Appeals in 2010:
In a case brought against an insurer in which a plaintiff seeks a declaration that it is covered under an insurance policy issued by the insurer, does a certificate of insurance by an agent of the insurer that states that the policy is in force but also bears language that the certificate is not evidence of coverage, is for information purposes only, or other similar disclaimers, estop the insurer from denying coverage under the policy?
634 F.3d 112, 115 (2d Cir. 2010). Unfortunately, the Second Circuit withdrew its certification, and the New York Court of Appeals has yet to address the issue.
Although commonly required in contractual situations, parties should exercise caution when it comes to COIs. Even in those jurisdictions where estoppel may be found, the inquiry is fact-specific, taking into consideration, inter alia, the language of the insurance policy, the language of the COI, the authority of the party issuing the COI, the insurer’s direct involvement in the issuance or approval of the COI, and the COI recipient’s detrimental reliance upon the party issuing the COI. Rather than rely on the COI, the better practice is to request and review the actual insurance policy—and all endorsements thereto—to confirm that the expected and agreed upon coverage is being provided.