Certificates of Insurance: The Myth and the Reality

As a tree care professional, you are probably all too familiar with insurance certificates, and depending on the size of your company, some of you may be requesting insurance certificates on almost a daily basis. But what are these documents that get issued on your behalf, and what do they truly mean?

What does a certificate of insurance tell you?

An insurance certificate is little more than an abstract that represents only a very few basic provisions of one or more insurance policies held by the insured company. Even though the form notes the effective and expiration dates (usually one-year policy terms) of the policies noted, it only represents that the insurance noted on the form is in effect on the day the certificate is issued. Basically, it is a one-day snapshot in time. It grants no guarantee that the policies noted will remain in effect beyond the date of issue of the certificate.

The certificate is issued with your client noted as a “certificate holder,” at bottom left (labeled “A” here). Special notations, such as including an Additional Insured, are made in the Descriptions of Operations area (B). Image courtesy of the author.

Certificate holder

When your customer asks you for an insurance certificate, the certificate is issued with your client noted as a “certificate holder” on the bottom-left corner of the document. So, does a certificate of insurance grant any insurance coverage to a certificate holder? Simple answer – not really.

A certificate holder has no rights under the policies noted on a certificate of insurance. Only you, the named insured, have rights under the policies noted. And let’s also understand that an insurance certificate does not create any form of contract between the certificate holder and the insured, or the insurance company noted on the insurance certificate.

Not uncommon are cases where certificate holders require that they have what is called “Additional Insured” status noted on an insurance certificate. “Additional Insured” status is usually aligned with the terms and conditions of a separate written contract between the certificate holder and the insured and is governed separately under the terms of the contract. The terms and conditions of a written contract between the insured and the certificate holder may not always fall within the scope of the insurance terms contained in the actual insurance policy held by the insured.

Whenever one is in a situation where written contracts and insurance certificates are involved, along with a careful review with your insurance professionals of the wording on insurance certificates, one also should seek professional legal advice on any written contracts that may be involved.

Does a certificate of insurance act as an insurance policy?

To further emphasize what was stated previously, no, it does not. Other than identifying the specific policies that the insured has in effect, an insurance certificate provides no detail to the forms of coverage, or lack thereof, contained in the various policies noted.

I once heard a story where a tree care company decided to begin offering snow-removal services to their clients. They assumed that their General Liability policy extended coverage for snow-removal services, and never specifically discussed with their insurance agent if they had snow-removal liability coverage. One of their new snow-service customers asked them for an insurance certificate, which the tree care company asked their agent to send to the customer. During the entire communications process, nothing about snow services was ever mentioned between the tree care company and their insurance agent. The certificate was issued.

Later, someone slipped and fell in the customer’s recently plowed parking area. A claim was filed against the tree care company for failure to provide proper snow removal. Unfortunately, the tree care company’s General Liability policy excluded claims stemming from snow-removal services, and the claim was denied. After the denial of coverage, the tree care company argued that they had the coverage, citing the insurance certificate and stating that the certificate was evidence of snow-removal coverage. Unfortunately, it was later proven in court that an insurance certificate is not an insurance policy and does not, and will never, grant specific terms of coverage, including exclusions in the policy. The more I think about it, this isn’t a story. It’s a nightmare!

Statements and notations

“Can your insurance agent make certain statements for you on a certificate of insurance beyond the basic insurance information?”

Fast answer, maybe only a very few, but not many.

Insurance agents can only note “Additional Insured” status for a certificate holder, and a very few other terms, so long as the actual insurance policy that the certificate is being issued under does, in fact, contain those terms in the coverage and policy conditions. Diligent insurance agents always check their client’s coverage before they make any notations on an insurance certificate. The insurance agent also may contact the insurance company directly for their approval before making certain notations on an insurance certificate.

Several states have insurance-certification laws that govern what can be legally stated on an insurance certificate. Where applicable, failure to abide by these laws can pose serious consequences for insurance agents and their clients.

What terms can be on an insurance certificate?

“Our tree care company is about to bid on a big contract for tree care services for a very large homeowners association. The homeowners association has detailed exactly what insurance terms are to be stated on the certificate of insurance that we are to provide for them.”

This example ties in with the previous commentary regarding the scope of written statements that can be made on insurance certificates. I am including this example here, as we are encountering these types of situations more frequently. If you find yourself in a position like this, you should discuss and review the requested terms with your insurance provider. If there are certain terms that your insurance agent is not comfortable noting, you should discuss them with your prospective client.

Remember what I noted before. An insurance certificate is not an insurance policy, and only the insurance company issuing the actual insurance policy has the right to determine the terms and conditions of the policy. Unauthorized statements made about the policy on an insurance certificate can very easily be determined as erroneous, and perhaps be construed as misrepresentations of the terms and conditions of the actual insurance policy.

Are sample copies valid?

“I’m tired of having to constantly call or email my insurance agent to get certificates of insurance. Can’t I just copy a certificate of my insurance to hand out as my clients request them?”

This practice is highly inadvisable. Sometimes the terms and conditions of one’s insurance plan can change over time, perhaps upon the individual policy’s renewal, and you run the risk of giving someone an insurance certificate that may have inaccurate information on it. An honest error? Probably, but an error nonetheless that could result in misunderstandings or, worse, an allegation of insurance fraud or misrepresentation. Insurance companies and their agents alike discourage this practice. We are more than happy to issue as many individual insurance certificates as you need on a day-to-day basis.

Some business owners have posted a sample copy of their insurance certificates on their websites. This practice is discouraged. There have been numerous cases where insurance certificates have been stolen from a website and used as what becomes fraudulent insurance evidence by unscrupulous operators.

Legitimate certificates of insurance

“My tree care company uses several subcontractors for crane work, stump grinding and some landscaping, and I regularly obtain certificates of insurance from them. How can I be sure the certificates I am getting are, in fact, legitimate?”

Realistically, most everyone is honest and upfront with insurance certificates, but there continue to be enough cases involving fraudulent insurance certificates that all business owners should be vigilant.

Most insurance agents have systems in place whereby they automatically issue all insurance certificates directly to both the certificate holders and their insured clients. Be wary of anyone who is always sending you their certificate directly, with no insurance agent involved in the communication.

Study each certificate you get closely. With today’s technology, virtually anyone can create all kinds of documents privately on their own. Look for areas where things don’t line up. Match the certificate you receive from subcontractors with one of your own certificates, and check to see if all the borders are in line. Look for different typesets in certain areas of an insurance certificate that may not match up with the typesets in other areas of the insurance-certificate document. If something does not look right, share it with your insurance agent.

Cancelation notification

“I keep insurance certificates on file for all the subcontractors my tree care company contracts for crane services. I assume that, God forbid, if their insurance ever got canceled for any reason, since I am a certificate holder on the insurance certificate, their insurance company will notify us if any of the insurance policies noted on the insurance certificate are canceled for any reason.”

Fast answer, they might.

Under the terms and conditions of most insurance policies, there contain no provisions in the policy wording that, in the event the referenced policy is canceled, that a certificate holder or additional-insured parties will receive notification of the cancelation.

From time to time I have encountered situations where a certificate holder has requested our client’s insurance certificate to include a written statement that all parties to the certificate be guaranteed notification in the event of policy cancelation.  Simply put, and insurance agent has no right or authority to make any such statements on an insurance certificate.

In summary

Streamline your insurance-certificate requests with your insurance agent. Provide complete information on all certificate holders, including full legal names, complete addresses and proper contact information. Also note in your request the nature of the work you are performing for the customer. This way, your agent can issue them quickly and efficiently and perhaps ask additional questions if needed. If your certificate holder (client) also has presented you with a written contract, share the contract immediately with your insurance agent, along with the certificate request. Review the contract with an attorney.

Involve your insurance agent immediately when confronted with complex certificate requests that contain numerous terms and conditions to be noted on the certificate.

Avoid the practice of using “template” certificates and distributing them yourself. Ask your agent to issue all certificates. It is our job, and we are happy to do it for you!

Keep records of all insurance certificates. Keep a separate record of all insurance certificates you obtain from others, such as subcontractors, as well as a record of all certificates issued to your clients on your behalf.

Review insurance certificates you obtain from others, making sure all coverage required is properly noted. Ask your insurance agent to review them as well.

Try to remember what a certificate of insurance is, and what it is not!

Rick Weden is team practice leader of the Tree Care Insurance Specialty Team at Corcoran and Havlin Insurance, a division of Cross Insurance and a 13-year TCIA corporate member company located in Wellesley, Massachusetts. He manages the insurance needs of many tree care operations countrywide, using a wide range of insurance companies, including ArborMax. He has presented at many TCI EXPOs and is a member of the Massachusetts Arborists Association.

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