QBBA Legal Eagle - Certificate of Insurance
OPTICAL ILLUSIONS OR WHEN A CERTIFICATE OF INSURANCE IS NOT A CERTIFICATE OF INSURANCE
Believe it or not, in spite of the fact that the usual Certificate of Insurance names your firm as an additional insured, in many cases your firm may in fact not be an additional insured. This appears to fly in the face of the traditional procedure of relying upon a certificate of insurance specifically naming the general contractor or owner. In many instances, a contractor who is entering into a small subcontract or who is pressed for time, may tell a subcontractor that he can start work as soon as he provides a certificate of insurance naming the general contractor as an additional insured on the insurance policy. The general contractor receives this "certificate", notes that it is from the insurance broker of the subcontractor, and notes that his name is typed on the document. The actual form usually used is called an AAcord Certificate of Liability Insurance@. Now when there is an accident on the job relating to or arising out of this subcontractor's work, be it bodily injury or property damage, the general contractor expects to be able to pass such loss through to the subcontractor=s insurance company. In the typical situation this would arise where the subcontractors employee is injured on the job or the subcontractor causes property damage. The general contractor expects the subcontractor=s insurance company to be responsible for such claim. More and more today, however, it is likely that the subcontractor=s carrier will deny the claim!
The basis for such denial has generally been stated to be based upon the form itself. Careful reading of the form shows that the subject form is not the "insurance" and that the holder of the certificate should review the actual policy and particularly the additional insured endorsment to ascertain whether or not he is an additional insured pursuant to the policy. In other words, if the policy itself does not recognize an additional insured, or recognizes an additional insured only under certain circumstances, such as where there is a written contract with an indemnity obligation, there may be no insurance. The certificate, in effect, states only that the subcontractor has the named insurance policies, but not whether the certificate holder is an additional insured.
The owner or general contractor may protest and say that this is tantamount to fraud by the subcontractor or certainly the subcontractor's insurance broker who issued the certificate to the general contractor. The general contractor/owner would expect that he would have a claim against the insurance broker, at a minimum for misrepresentation and deceit. However, once again the courts have generally held against the general contractor/owner on the grounds that the subcontractor=s insurance broker has no legal obligation to the general contractor/owner and the general contractor/owner should read what he receives and otherwise be responsible for what he purchases.
So what should a responsible general contractor or owner do? First, he should not simply ask for the certificate of additional insurance, but should ask to see the actual policy and the endorsement with respect to additional insureds to insure that it meets all the requirements to be an additional insured. Usually there is an endorsement to the policy with respect to additional insureds. If there is no endorsement in the policy with respect to additional insureds, then there is no insurance coverage to the certificate holder. The insurance broker for the general contractor/owner receives premiums and commissions for doing the insurance work for the general contractor/owner and makes a fair sum for this work. The general contractor/owner should call upon his broker to make sure that the subcontractor has complied with the insurance requirements and has given the appropriate insurance. Of course, the general contractor/owner can also go to an attorney who is familiar with insurance matters, and ask whether or not he is properly protected.
WANT MORE INFORMATION ON THIS SUBJECT OR ON YOUR OWN LEGAL MATTERS?
Speak to our LEGAL EAGLE, Bert Tablante at the Alvy & Tablante, LLP Attorneys at Law at 516-328-7181 or email him at altablaw@aol.com
The article is written by
Albert S. Tablante, Jr., legal counsel
to the association, and a member of the
law firm of Alvy & Tablante, LLP.
Alvy & Tablante specializes in
business and litigation matters in the
construction industry.
Mr. Tablante can be reached at (516) 328-7181.
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