It has become commonplace in commercial transactions for one party to provide proof that insurance requirements (e.g., general liability, fire and other casualty, worker's compensation, etc.) have been satisfied by the party delivering the Certificate of Insurance. Sometimes the Certificate of Insurance also purports to confirm that another person or entity has been named an "additional insured" to such policies. Do Certificates of Insurance actually prove that the required insurance coverages are in place? Unfortunately no.
The law in New York is now that a person receiving a Certificate of Insurance cannot rely upon that Certificate of Insurance as proof that the insurance coverage referred to in the Certificate is actually in place. The courts of New York have held that a Certificate of Insurance, by itself, is insufficient to establish that insurance coverage is actually in place or that the Certificate holder is actually an additional insured on such policies. In fact, New York case law has established that a Certificate of Insurance is merely evidence of the possible existence of a separate contract for insurance, but is not conclusive proof that such a contract exists.
In other words, a Certificate of Insurance is not in and of itself a contract to insure. At least one court in New York has held this to be true even though the Certificate was issued by an agent of the insurer, and this position has been confirmed in an opinion issued by the New York State Insurance Department Office of General Counsel.
So what do you do to protect yourself? In order to be assured that individuals and companies with whom you are doing business have required insurance coverages in place, we recommend that you receive direct confirmation of such coverage from the other party's insurance company. Such confirmation can be obtained by securing a copy of an "additional insured endorsement," which is a portion of the insurance policy issued by the promisor's insurer. Please note, however, that there are different types of additional insured endorsements, so it is important to make sure that you are receiving the endorsement which best fits your needs.
For more information regarding insurance coverage and Certificates of Insurance, contact one of the members of our Corporate Practice Area or our Insurance Practice Area.