In answer to the Ninth Circuit’s certified question, the Washington Supreme Court held in T-Mobile USA Inc. v. Selective Insurance Co. of America, Slip. Op. No. 96500-5, 2019 WL 5076647 (Wash. Oct. 10, 2019) that where an insurer’s agent represents in an insurance certificate that a third party is an “additional insured,” the third party is an insured despite failing to satisfy the policy’s additional insured endorsement and the certificate explicitly stating that it confers no policy rights upon the holder. Two dissenting justices would have denied additional insured status to the third party given the terms of the certificate and policy.

Facts

The factual core of the dispute was whether Selective Insurance Company had to provide additional insured status to T-Mobile USA (USA) where only USA’s subsidiary, T-Mobile Northeast (NE), qualified as an additional insured under a contractor’s commercial general liability policy. NE hired a construction company to build a cell tower on a New York rooftop; the contract required that NE be named an additional insured under the contractor’s policy. Although USA was not a party to the contract, it had approved the contract. The policy provided additional insured status to any third party for whom the contractor was contractually obligated to provide such status. USA, therefore, did not qualify as an additional insured.

Selective’s agent, however, issued a certificate of insurance naming USA an additional insured at the contractor’s request. The certificate stated in bold that it was “issued as a matter of information only and confers no rights upon the certificate holder,” did not “amend, extend, or alter” coverage under the policy, and, addressing additional insureds specifically, “[i]f 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).”

The building owner sued the contractor and USA for damage caused by the cell tower’s construction. USA tendered its defense to Selective but coverage was denied because USA had no contract with the contractor. USA then sued Selective for bad faith in Washington federal court. Selective moved for summary judgment arguing that USA was not an additional insured notwithstanding the insurance certificate. In opposition, USA argued that it was entitled to rely on Selective’s agent’s representation in the certificate that USA was insured. The district court found that the agent had apparent authority to act on behalf of Selective yet the court agreed with Selective that USA was not an additional insured and dismissed the lawsuit. USA appealed to the Ninth Circuit Court of Appeals. Thereafter, the Ninth Circuit asked the Washington Supreme Court to determine which document governed USA’s claimed additional insured status: the certificate or the policy.

Holding

The Washington Supreme Court answered that Selective was bound by its agent’s representations in the certificate under long-established Washington law holding that an insurer is bound by its agent’s representations if the agent acts within her actual or apparent authority and the third party reasonably relies on the representations in good faith. In the court’s view, permitting Selective to disclaim its agent’s representation that USA was insured would permit insurers to “mislead without consequence.”1

The court was primarily troubled that the insurance certificate contained contradictory representations: that USA was and was not an additional insured. To resolve this purported contradiction, the court held that the certificate’s specific statement that USA was an additional insured controlled over its general boilerplate disclaimers. To the majority, the pre-printed disclaimers were too general and disclaimed “virtually every bit of information provided by the certificate[;]” whereas the statement that USA was an additional insured was specifically “written” into the certificate for USA’s benefit and was consistent with the certificate’s purpose to inform USA that it was insured.

The majority emphasized, however, that the case does “not hold that all disclaimers are ineffective[;]” but only that these specific disclaimers on the facts of this case are ineffective. The court distinguished earlier cases holding that an insurance certificate did not create coverage because, in those cases, the insurer’s agent had not issued the certificates. The majority thus crystalized its view that the case “is about an agent’s representations” and that whether the representations were made in an insurance certificate was a collateral issue.

By contrast, the dissenting justices focused on the insurance certificate. They would have held that USA was not an additional insured because the insurance certificate was only “informational” and did not confer any coverage; let alone coverage not specified in the policy. The dissent also found USA’s purported reliance on the insurance certificate unreasonable because USA was a sophisticated business entity, with much experience in insurance, and therefore should have known that it was not covered by the policy.

T-Mobile’s ramifications are difficult to predict. The opinion could be read as holding that insurance certificates can create coverage from whole cloth contrary to the policy’s provisions. Or, it could be considered a rote application of well-established law: a principal is bound by their agent’s representations. Furthermore, given that insurance brokers — who are generally not considered agents of the insurer — are often the ones issuing insurance certificates, circumstances similar to those in T-Mobile may not frequently arise.