Many parties to contracts seek to be added as an insured to another’s insurance policies or agree to add someone as an insured to their coverage.  If the process of adding someone to coverage is not done correctly, then neither party to the agreement is happy—the would-be additional insured (because coverage is not provided) and the party obligated to get the coverage (because it has breached the contract).

There are many perils in the process of establishing additional insured coverage.  Two are illustrated in the Liberty Surplus Insurance Corp. v. Ledesma & Meyer Construction Co., No. 2:12-cv-00900-RGK-SP (C.D. Cal. Apr. 11, 2019).  In Liberty, a construction company had entered into a contact with a school district.  The contract obligated the construction company to defend and indemnify the district from claims results from the construction company’s acts or omissions.  It also required the construction company to purchase general liability insurance.  When the company and the district were sued, the company’s insurer denied coverage, arguing that the district had not been added as an insured to the company’s policy.  The court agreed.

The court first noted that the contact did not actually require that the district be added to the coverage.  Instead, it imposed two separate duties on the construction company—one to defend and indemnify the district and a second to purchase liability insurance. Therefore, the court held that the district was not an additional insured because the contract “did not require [the construction company] to name the School District as an additional insured . . . .”  Slip op. at 7.

The court then turned to the district’s argument that there were certificates of insurance that the insurer received that stated that the district was an additional insured.  The court rejected this argument, too.  It pointed out that under California law, “a certificate of insurance is not an insurance policy or an amendment to coverage under an insurance policy.” Id.  It also noted that the certificates contained the disclaimer required by the California Insurance Code.  The disclaimer states that a certificate “is not an insurance policy and does not amend, extend or alter the coverage afforded by the policies listed therein.”  Cal. Ins. Code § 384.

In this regard, the decision is in accord with many other decisions across the United States.  See, e.g., American Hardware Mut. Ins. Co. v. BIM, Inc., 885 F.2d 132, 139-40 (4th Cir. 1989) (“[T]he general rule [is] that ‘a certificate of insurance is not a contract of insurance but is merely the evidence that a contract has been issued’”); Atlas Assurance Co. v. Harper, Robinson Shipping Co., 508 F.2d 1381, 1386 (9th Cir. 1975) (“A certificate of insurance ‘is not, and does not purport to be, a policy . . . .);  G.E. Tignall & Co. v. Reliance Nat’l Ins. Co., 102 F. Supp. 2d 300, 304 (D. Md. 2000) (“[o]rdinarily, the presentation of a certificate alone does not create coverage or legal duties”);Bradley Real Estate Trust v. Plummer & Rowe Ins. Agency, Inc., 136 N.H. 1, 6, 609 A.2d 1233, 1235 (1992) (“In effect, the certificate is a worthless document; it does no more than certify that insurance existed on the day the certificate was issued.”).  In fact, the Research Committee of the Risk and Insurance Management Society, Inc. has stated:

A certificate of insurance is merely evidence of insurance coverage.  It is not coverage itself.  It is not a policy, nor can it be relied on as a policy.  Some have referred to the certificate as “the illusion of protection.”  Because the certificate is only evidence of in-place coverage, and not the coverage itself, many problems can arise with their use.

RIMS Research Committee, Certificates of Insurance 7 (2000).

In light of the above, parties who are obligated to provide or wish to receive additional insured coverage should make sure that their contract clearly states that such coverage should be afforded and should not rely solely on certificates of insurance as a vehicle to provide such coverage.