Certificates of Insurance & Additional Insureds: Review Your Contracts
By: Lillian Romero-Gomez and Jessica Gomez-Lizarraga, Esq.
Many times our clients will contact our office or send us a certificate of insurance request through our website, and wonder why there are follow-up questions or requests for additional documentation. This follow-up usually occurs when our client seeks the certificate of insurance for an additional insured. Generally, an entity needs to be added as an additional insured when it provides a service; or collaborates with other public entities or businesses; or has a financing/leasing agreement. However, there are legal implications to consider.
Baker Romero’s website glossary defines an additional insured as “a person or corporation, other than the Named Insured on the policy, who is protected against loss by the terms of the policy.” For example, in a lawsuit, the additional insured would be defended and indemnified under the terms and conditions of the named insured’s policy. Many entities require a certificate of insurance as proof that it has been added as an additional insured. However, a certificate of insurance is not definitive proof of additional insured coverage and does not guarantee that they will be covered in the event of a lawsuit. Additionally, a contractual obligation to “defend,” “indemnify” and “hold harmless” does not necessarily mean that you have a valid additional insured agreement in place.
Your organization should follow these guidelines when dealing with additional insureds:
- Have a Contract in Place– You cannot have a valid additional insured without a contract.
- Have Clear Additional Insured Contract Provisions– Make sure your contract clearly states who must be an additional insured and includes the appropriate wording regarding the interplay of your insurance. Consult with your attorney to verify that the appropriate language is in place.
- Understand the Terms, Conditions, and Exclusions of Your Policy– Remember a certificate of insurance does not create a legal obligation of insurance or coverage. Only your policy and the Additional Insured Endorsement provides coverage.
- Always Update Your Broker Regarding Locations, New Operations, or Services– A certificate of insurance does not contain any terms, conditions, and exclusions of your policy. Nor does it reflect any updates to your policy. If you have a claim and fail to disclose that you have a new location or operation, you and your additional insured may be denied coverage.
Additional insureds can have tremendous legal implications. It is important for you to continually ask questions and review your contracts with your attorney.
As always we are here to help. If you have any questions please give us a call.
This article is for information purposes only. It is not meant to be construed as legal advice or advice relating to a specific policy.