It’s been almost a year since my last post on insurance certificates. That post dealt with the application of Georgia law to insurance certificates issued for property, operations, or risks that are located outside Georgia. My conclusion was that Georgia law did not govern what could be put on such insurance certificates. Instead, an agent must look to the law of the state in which the property, operations, or risks are located to determine what can and cannot be put on insurance certificates for them.
The subject of insurance certificates is a standing agenda item for each meeting of IIAG’s Commercial Lines Committee. At last week’s meeting, the consensus was that the number of problems with insurance certificates had dropped off as everyone became more familiar with the requirements of Georgia law. It appears that most of the problems now concern certificates for out of state projects, which is understandable given the variety of the rules in other states for insurance certificates.
However, there was a recent article in Property Casualty 360 about an International Risk Management Institute study that found over 90% of the hundreds of insurance certificates that were audited over a period of four years contained at least one misrepresentation of the coverage actually provided by the underlying policy. That study focused on the construction industry and found most mistakes were made with additional insureds and the scope of environmental coverage.
The majority of the mistakes regarding additional insureds were due to a misuse of a blanket endorsement for additional insureds and the failure to properly complete endorsements that named the additional insureds. Both of these mistakes were the result of the agent failing to read the endorsements in question to make sure they provided the coverage required by the construction contract. A simple review of the latter type of endorsement (e.g., ISO CG 20 10 and CG 20 37) would have revealed that it failed to actually name or otherwise identify those entities who were additional insureds under the policy in question.
The problem with the blanket endorsement (e.g., ISO CG 20 33) is that it only applies to entities with whom the named insured has a written contract that requires that entity to be named as an additional insured and that status only exists for as long as the named insured is actually performing services for the entity. The use of such an endorsement will not provide additional insured status for anyone else. If the contract requires that such status be given to any of the contracting entity’s subcontractors or affiliates, a blanket endorsement for additional insureds will not do that.
If the insurance certificate contains anything that indicates the policy underlying it provides coverage for all the additional insureds required by the policyholder’s contract with the certificate holder and either of the above problems exist, the agent who issued that certificate will have a problem. This is one more reason for agents not to make any such representation on an insurance certificate. Such a certificate should only refer to any additional insured or other endorsements by name or identifying number and leave it to the certificate holder to review those endorsements and decide if the contract’s requirements have been met.