Certificates of Insurance are Worthless! What Now?

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Actually, Certificates of Insurance are worthless for what you want them for. But, you knew that.

In case you didn’t already know this, I’ll try to make it clear. Forget whatever you “used to know.” The rules have changed. The history isn’t important.

A Certificate of Insurance CONFERS NO RIGHTS on the Certificate Holder. It is not a contract between the insurance company and the Certificate Holder. The insurance company is not obligating itself to do anything for the Certificate Holder. The insurance company says it will “endeavor” to let the Certificate Holder know if the coverage is being terminated, but the Certificate Holder has no recourse against the insurance company if it doesn’t give such a notice.

I doubt there are any jurisdictions (states) left where you can get a custom form of Certificate of Insurance that would give you, the Certificate Holder, any of these rights. Successful pleas were made by the insurance industry to various legislatures and regulatory rule makers, and the highly supervised insurance industry succeeded in getting the “law” to protect insurance companies against themselves by barring them from issuing meaningful Certificates of Insurance.

Basically, a Certificate of Insurance is only a “snapshot” of what insurance was being carried at the very time the Certificate was prepared. And, a Certificate doesn’t, and never did, show the details of the coverages in sufficient form such that you would know what endorsements were included. And, if the insurance coverage changed the very next day, even if the changes were “in the works,” the Certificate would never reveal that.

So, what’s a concerned “mortgagee” or other form of “loss payee” or an “additional insured” to do?

To enjoy any one of those (perhaps) exalted statuses, the actual policy has to “know who you are.” In the case of a mortgagee who wants “mortgagee-loss payee protection,” you need to be named on the Declaration page of the policy and you’ve got to be sure that the actual policy form used includes, as part of its conditions, “mortgagee” coverage. The very commonly used ISO property insurance policy does.

In the case of any other type of “Loss Payee,” you’ve got to be identified on either the policy’s Declaration Page or on the Endorsement, which MUST be part of the policy itself. Further, you’ll want to make sure that the Declaration page of the policy ACTUALLY LISTS the Endorsement. One of the purposes of a policy’s Declaration page is to list every form that makes up the entire insurance policy. Essentially, all of the listed forms are “incorporated by reference” into the policy itself. And, as if all of that isn’t yet enough, the Loss Payable Endorsement itself has three “options,” and you’ll still have to make sure you’ve been designated under the right option. Lastly, just because you are properly named, doesn’t mean that you don’t have to make sure that your kind of interest in the insured property qualifies you for that particular Loss Payee status.

Now, Mortgageholder and other Loss Payee statuses are all “property insurance” interests. Being an Additional Insured is concerned with a whole other kind of policy or coverage – Liability Insurance. The basics are the same. Forget the Certificate of Insurance. Verify that there is an Additional Insured Endorsement, and the proper one at that. If the policy’s Additional Insured Endorsement is not in “blanket” form, make sure you are named as an Additional Insured on the policy’s Declaration page or on the Endorsement itself. If it is in blanket form, make sure your right to be an Additional Insured derives from a written agreement. Make sure you actually qualify for protection under the Additional Insured Endorsement. BUT HERE IS THE BIG ONE! There are more than 30 types of Additional Insured Endorsements, all for different situations. You need to make sure the policy includes the right one and that you qualify for coverage under it. Some endorsement forms are “blanket” in nature. Some require that the Additional Insured’s name be included. The standard ones for leases are CG 20 12 and CG 20 24 [and not the CG 20 10]. How will you know which one is the one you need? You’ll ask an insurance professional. You can expect a Blog entry on the topic, but “who knows when,” and it will not be a substitute for getting help from a real, true, genuine insurance expert. That’s not this lone Ruminator.

Oh, yes – there is one more thing. If you want to be really, really sure you have coverage, buy the policy yourself. Then, you control what you’ve bought. If you think being an Additional Insured affords you protection, then when the other party loses the policy or you find out the coverage wasn’t right, you’ll have a claim against that other party. But, if you felt the other party needed insurance in the first place (after all, insurance is primarily “credit enhancement”), then you shouldn’t expect that the other party can write you a check. If you own the building, carry your own property insurance. Charge the other party if you will, but control the policy.

Oh, yes – another “one more thing.” It isn’t enough to make the documents call for Loss Payee or Additional Insured status. It isn’t enough to look for the “right” papers at the outset of the deal. You’ve got to monitor the continued coverage and any changes to the coverage. There are services that do that for you. If the coverage was important, you ought to look into such services.



  1. Ira, another thoughtful post. I never took a certificate of insurance to be anything more than evidence that the landlord carried a policy with the correct limits of coverage and list of loss payees or additional insureds. However, you caution us to verify a lot of important things. This is very difficult. As a tenant in a multi-occupancy building, a landlord will almost never allow you to review the actual policy and will only offer the “standard” ACORD form with the specific additional insured and loss payee shown. I’ve represented national tenants who take the same position – that the policy is confidential and all the landlord gets is the certificate. For any tenant smaller than an 800 pound gorilla, have you been successful in reviewing the landlord’s policy?

  2. David Gordon says

    Julie Williamson of AkermanCerterfitt (Miami), Rick Mallory of Allen Matkins et al (san Francisco) and I have read this and JulieIra responds: Ira seems to say that there is no “additional insured” coverage for property insurance. This did not jive with my memory so I looked up an admittedly old edition of Malecki and Gibson’s Additional Insured Book. It allows that there are no standard additional insured endorsements promulgated by ISO for use with commercial property insurance forms. But it then describes how to get additional insured coverage. It also states that “additional insured” is usually used in one of two situations: coverage added after policy issuance, and when the add’l insured does not have an insurable interest in all of the covered property under a policy.

    All the more reason to be sure that your client is advissed to review the insurance provisions of every contract or lease with its insurance professional.

    • Yes, one can get “Additional Insured” status on a property insurance policy, but the benefit of doing so would appear to be very limited. It appears rare that anyone real gets such coverage. The policy covers property in which an insured has an interest (and, yes, a tenant can have a “use” interest, though its value may be amorphous). Where a party wants to control the proceeds and have a say over settlement and be able to protect the policy by having the right to pay the premiums, and some other things, there is “Loss Payee” status. Whether someone without a property interest in the insured property really qualifies as such (despite being named on an Endorsement or included within a blanket provision) is something I haven’t figured out because my working hypothesis is : “no.” So, what do I think is the benefit of being named as an Additional Insured on an property policy? I think it can give the Additional Insured a first party claim against a carrier and open the opportunity to get punitive damages for bad faith denials, something a third party cannot get.

      I hope a true insurance professional will weigh in on the subject. You and I are just poor “dirt” lawyers.

  3. Aieeeeeee! Additional Insured on a property cover is LETHAL.

    The property conditions document provides that if ANY insured engages in misconduct with respect to the issuance of the policy, the condition of the risk, or a claim, then the entire policy is void as to all insured parties. The only exception is the mortgagee’s special coverage, which operates as if there was a whole separate policy that just covers the mortgagee’s interest. But he must be named, on the declarations page, as the mortgagee. NOT AS A LOSS PAYEE, BECAUSE A LOSS PAYEE (even under Lender’s Loss Payable coverage) IS SUBJECT TO THE VITIATION CLAUSE. If the borrower commits arson, a mortgagee named as such will recover the insurance but a loss payee gets bupkes.

    In construction, many are those who want coverage as an AI, not because they want the coverage but because they don’t want the property carrier to subrogate against them. Guess again: when an engineer is named as an additional insured as its interest may appear, it will not be covered for a part of the job it didn’t design, so the company will still subrogate against the engineer. If you want to eliminate subro you need to waive the right of recovery in the underlying contract instead of trying to slip one in through the back door.

    BTW, I am a dirty-shoe construction lawyer. But I learned long ago that if you are in the construction business and you are not properly insured, then it’s only a matter of time before you are out of business, likely with a bang. There are many resources for lawyers to acquire knowledge of insurance: they lack only the motivation to serve clients by providing seamless service that includes knowledge of how to use insurance. It might not be malpractice for the lawyer, but it’s bad business judgment on the part of the insured not to have counsel who understands their business AND their insurance needs. It might not be part of the lawyer’s standard of care, but how much comfort is that when one of your best clients goes belly up because the insurance isn’t right?

  4. Ira, I couldn’t agree more and here are some stats your readers may be interested in knowing. Many landlords and property managers routinely receive certificates of insurance and simply file them without proper review, or perform a cursory review. I’ve know companies that ‘delegate’ that review to an administration or assistant manager function. These practices are a mistake.

    I’ve previously worked with insurance experts to have them review certificates of insurance to ensure they comply with the terms of the tenant leases. This is a specialized field with a lot at stake, as you note Ira, so I have used those experts to review the certificates. Approximately 1/3 of the certificates received and reviewed were routinely deficient, incorrect or out of compliance with the lease terms.

    The implications are significant for both the owner and, if applicable, a third party manager should a property have 1/3 of the tenant required insurance out of compliance. That could be its own book.

    On a related matter I have written about my expectations for increases in property insurance rates in the months to come and discuss some management strategies to consider when managing property insurance costs on my blog at http://advance.beyond-the-building.com

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