Contractors Beware – Certificates Of Insurance Do Not Guarantee Additional Insured Coverage!

Many contractors require their subcontractors and suppliers to provide additional insured coverage in case of a claim arising from the subcontractor’s or supplier’s work or products; however, if your contract only requires your subcontractor or supplier to provide a Certificate of Insurance stating that you are an additional insured under their policies, you could be left holding an empty bag.  Under many states’ law, Certificates of Insurance do not provide coverage at all.  Indeed, the standard form Acord Certificate of Liability Insurance specifically states that it is not proof or evidence of actual coverage under the policies identified therein.  This language states:


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.


So what can you do to protect yourself?  One common practice is to require in the subcontract that specific additional insured policy coverage forms be included under the subject policies.  Again, however, just because those specific forms are listed on the Certificate of Insurance does not mean they are actually placed on the policies!  In fact, even if the subcontractor or supplier does include you as an additional insured on their policies, it does not mean that the additional insured coverage that is provided will cover the types of losses that could be anticipated for your project.  There are dozens of different additional insured forms available in the insurance market, including multiple automatic additional insured endorsements where you do not have to be specifically identified under the policy, if your contract with the policyholder requires additional insured coverage – and each of these “automatic” additional insured forms provide different types of coverages.  Additionally, there are multiple specific additional insured endorsements, some of which provide coverage for the additional insured only when work is ongoing, or only when work has been completed, or only for specific types of projects, or only for specific types of additional insured relationships, and so on. 

Best practice is to require that your subcontractors and suppliers provide copies of their policies so that your risk managers can review specifically what is included in the additional insured coverage you have required.  This is an onerous task as insurance policies are notably difficult to read and understand, and can run into hundreds of pages.  A shortcut would be to require your subcontractors and suppliers to supply not only a Certificate of Insurance, but also the declarations pages and all of the additional insured endorsements they have purchased for the policy that you are concerned with.  It is also advisable to draft your contracts to specifically identify, by name and/or form number, the policy forms that are required to be obtained, then confirming that such have been obtained.

We understand that the bidding process is complicated and time-consuming, but ensuring that the subcontractors and suppliers you select for a project comply to the word with your requirements will save many headaches, and uninsured claims, in the future.  If you would like assistance in drafting contract language, or reviewing the policies of your subcontractors and suppliers, the attorneys at Kohnen & Patton are experienced and skilled in helping to ensure that you are not left with either no additional insurance coverage or additional insurance coverage that is not applicable to the loss or claim.  Please contact Kim Kyle or Colleen Blandford at Kohnen & Patton for further assistance.