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Don’t Rely on Certificates of Insurance!

Many business situations merit obtaining additional insured status on the policy of another party.  A distributor or purchaser may want it on a manufacturer’s policy. A commercial building owner may want it on a tenant’s policy. A business owner might need it from its general contractor in a remodeling or new construction project. And a manufacturing company may want it on the policies of its third-party warehouses and other service providers.

“Additional Insured” status means you are insured under an insurance policy in addition to the party that purchased the policy who is the “Named Insured.”  As an Additional Insured, you can attempt to seek coverage for claims made against your business under the Named Insured’s policy.

How do you obtain Additional Insured status?

Some think they obtain rights as an Additional Insured through a Certificate of Insurance (COI) that names them as an Additional Insured. This is not the case. A COI is helpful, but it is for informational purposes only, providing a statement of insurance coverages that were in effect as of the date the policy was issued.  Changes to or terminations of the policy, coverage details, exclusions, reductions in available coverage due to other claims, and other important policy terms are not reflected on the COI. A COI is not binding on the insurance company and ultimately, the terms of the insurance contract between the insurance company and the Named Insured control what rights, if any, an Additional Insured might have.

An insurance policy may require a special endorsement to add an Additional Insured and without that endorsement, an Additional Insured has no rights under the policy regardless of what the COI states. There are many different COI forms. Some COI forms contain the following admonition:

IMPORTANT: 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.

If the COI you receive does not include this warning, don’t assume you have Additional Insured status.

Being named an Additional Insured involves time and effort.  Do NOT take the word of the Named Insured or its broker that your business has been added as an Additional Insured, because requirements for providing this coverage vary policy to policy.  Some policies streamline the process but many do not. To be safe, obtain an Additional Insured endorsement to the Named Insured’s policy. If an endorsement is not available or you are told one is not needed, require that the Named Insured make a representation in its written agreement with you that there are no endorsements or other conditions that must be satisfied before you have rights as an Additional Insured and carefully review the Named Insured’s policy, including the declarations page, the forms and endorsements page, the specific pages showing liability limits, and the terms of the policy endorsements, to confirm this to be true. Discuss these issues with your insurance agent, risk manager or legal counsel to determine how best to obtain the coverage you’re looking for.

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