If you want to know why certificates of insurance mean absolutely nothing, just read the two little disclaimers right at the top of the Acord form that state:
Disclaimer #1: “This certificate is issued as a matter of information only and confers no rights upon the certificate holder. This certificate does not affirmatively or negatively amend, extend, or alter the coverage afforded by the policies below. This certificate of insurance does not constitute a contract between the issuing insurer(s), authorized representative or producer, and the certificate holder.”
Translation: This certificate means absolutely nothing and is essentially just a piece of paper to make you feel better. It does not guarantee any coverage at all, you cannot use it in a claim or court case, and it may or may not be entirely accurate in what it communicates and no one is responsible for any inaccuracy.
Disclaimer #2: “If the certificate holder is an ADDITIONAL INSURED, the policy(ies) must have ADDITIONAL INSURED provisions or be endorsed. If SUBROGATION IS WAIVED, subject to the terms and conditions of the policy, certain policies may require an endorsement. A statement on this certificate does not confer rights to the certificate holder in lieu of such endorsements.”
Translation: Again, this paper is worthless. If you want to know you are actually covered, you have to READ. THE. POLICIES. that supposedly afford such coverage and waivers of subrogation. Otherwise, you’re just assuming and you know what they say about assuming, right?
It FLOORS me that so many businesses run their risk management departments (I’m talking BIG, HUGE businesses too) based upon a piece of paper that says right at the top it means absolutely nothing.
Worse, those certificates get screwed up all the time. Not just every now and then, but DAILY.
Real-life example: Yesterday I talked with a risk manager at a really big insurance firm who handles all the certificates for their client that is a large general contractor.
According to the contractor’s internal compliance director and the risk manager they had a number of subcontractors on a project that did not have residential work exclusions on their general liability policies.
When I asked how they knew that, they said “because it says so on the certificate.”
Well, seeing as one of my clients who absolutely does have a residential exclusion on their general liability policy is working on this job (and I have not once seen a California contractor or subcontractor general liability policy without such an exclusion) I knew that was totally false.
Since this issue arose because my client’s current broker issued an accurate certificate I knew that wasn’t where I would find evidence to show the risk manager.
So I asked the risk manager if she had certificates on file for my client from a past broker indicating there was no residential exclusion, and she said yes.
I reviewed that policy years ago when I first got engaged by my client and the trouble is that policy had not one, but TWO specific residential exclusions on it.
Not surprisingly, the old broker issued multiple certificates claiming there were none.
Coverage is determined by what is written in a policy, PERIOD. What a certificate of insurance says or what you hear over a phone call about coverage is worthless. Utterly worthless.
Folks, if you do not read the insurance policies backing up the certificates you collect you are BEGGING for trouble – – – and if you beg long enough you’re going to get what you ask for.
The insurer will argue they are not bound by a certificate that a broker issued, and the broker will argue they are not responsible for what is in a policy because they did not write the policy and simply issued the certificate as instructed by the insured and/or it’s job contract requirements.
Essentially, everyone will argue it is not their fault and believe it or not – – – it’s possible for both sides to win and nobody to be legally required to step up and pay your bill.
You’ll have the pleasure of doing that all on your own after years of headache and stress.
Or, you could just spend an hour or two reading and deal with it up front.
I am of the opinion that an ounce of prevention is worth a pound of cure.
The choice is yours.
To Your Success,