January 20, 2010
An Owner typically seeks to be protected from liability arising out of the work of its contractor. Contractors also seek protection from the subcontractors they hire. “Additional Insured” status provides extra coverage to the owner or contractor in the event an insurance claim is made. To receive this extra coverage, an owner (contractor) often requires its contractor (subcontractors) to provide “additional insured” status under a commercial general liability (CGL) policy. “Additional insured” status provides a defense and indemnity to the additional insured. Unfortunately, an owner or a contractor may accept a certificate of insurance as evidence of additional insured coverage only to find out after a claim is made that the certificate of insurance naming it as an additional insured is worthless.
The Certificate of Insurance
The certificate of insurance is a form usually prepared by the named insured’s broker. The certificate of insurance identifies the type and amount of insurance coverage provided to the named insured. It generally does not provide specifics as to what is covered under the policy. Some forms may contain a disclaimer that the recipient of the certificate has no rights under the policy. Although certificates of insurance are frequently used, they should not be relied upon to establish coverage or the presence or absence of an endorsement. Failure to be aware of the accuracy of the certificate of insurance and to understand how it operates can leave one relying on it exposed. This is illustrated in the case of United Stationers Supply Co. v. Zurich American Ins. Co., 896 N.E. 425 (Ill. App. 2008)
The Intended Coverage
United Stationers Supply Company (United Stationers) entered into a contract with D.C. Taylor Company (Taylor) for a roof replacement. The contract provided, in addition to an indemnification provision, that Taylor would present to United Stationers a Certificate of Insurance demonstrating full compliance with the insurance and indemnity provisions of the general conditions of the contract. The contract listed four types of insurance to be obtained by Taylor including: Workers Compensation, Contractual Liability, Automobile Liability and Hazardous Materials Liability Policy Endorsement.
The contract required Taylor to obtain certificates of insurance signed by an authorized representative of the insurance company and stating in pertinent part that “such Certificate(s) shall name [United Stationers] as an additional insured on a primary and non-contributory basis.” The contract did not specify any type of insurance to which United Stationers was required to be named as an additional insured.
The CGL Policy
Zurich American Insurance Company (Zurich) issued a policy to Taylor which contained an endorsement Form UGU-614-A CE (10/02) which amended the CGL policy as follows:
“FORM U-GL-1175-A CW 09/03 ADDITIONAL INSURED AUTOMATIC-OWNERS, LESSEES OR CONTRACTORS- BROAD FORM IS ADDED TO THIS POLICY PER THE ATTACHED.”
The “Broad Form” defined an “insured” as:
any person or organization whom you are required to add as an additional insured on this policy under a written contract or written agreement.” It further provided that “the insurance provided to additional insured applies only to ‘bodily injury’, ‘property damage’ or ‘personal and advertising injury’...
Finally, the policy stated that throughout this policy the words ‘you’ and ‘your’ refer to the Named Insured shown in the Declarations, and any other person or organization qualifying as a Named Insured under this policy.” The declaration only named Taylor as the named insured and no other person or organization was listed within the policy.
United Stationers was not listed as an additional insured in the CGL policy. However, the certificate of insurance listed it as the certificate holder for the CGL policy. The certificate of insurance stated that the “Certificate Holder is an Additional Insured on the General Liability policy on a primary & non-contributory basis with respect to the operations of the insured.” The certificate of insurance also stated: “ it is issued as a matter of information only and confers no rights upon the certificate holder. This certificate does not amend, extend or alter the coverage afforded by the policies below.” The certificate of insurance identified the policies as the CGL policy, an automobile liability policy, an excess liability policy, and a contractors/ pollution liability policy.
An employee of United Stationers was injured during the roofing project and filed suit against Taylor. In response Taylor filed a third party complaint for contribution against United Stationers alleging that the employee sought damages for injuries sustained during the scope of his employment with United Stationers. United Stationers tendered coverage to Zurich based upon the Certificate of Insurance. Before Zurich made a decision as to coverage, United Stationers filed a declaratory action requesting an order declaring that Zurich was obligated to defend and indemnify. Zurich contended that United Stationers did not qualify as an additional insured and even if it did, it was excluded from coverage by the CGL policy’s employer liability exclusion.
No Additional Insured Coverage
United Stationers argued it was an additional insured on two grounds. First, it argued that the certificate of insurance specifically named it as an additional insured under the CGL policy. Second, it argued that the construction contract required Taylor to provide insurance for bodily injury although it admitted that the contract was silent on the precise type of liability policy. Zurich countered that United Stationers did not establish that it qualified as an additional insured under the CGL policy. Zurich also pointed out that there was no written contract requiring Taylor to name United Stationers as an additional insured on the CGL policy. Zurich pointed out that the only provision in the contract that required United Stationers to be named as an additional insured was silent as to which policy it was to be added. Zurich further added that the certificate of insurance did not modify the terms of the CGL policy and did not create additional insured coverage.
Concluding that the certificate of insurance did not confer coverage of additional insured status to United Stationers, the court analyzed two lines of cases. The first is where the certificate of insurance did not refer to the policy and the terms of the certificate conflicted with the terms of the policy. In those cases, the courts found the certificate language should govern the extent and terms of coverage. The other line of cases is where the certificate refers to the policy and expressly disclaims any coverage other than that contained in the policy. In those cases, the courts found that the policy should govern the extent and terms of coverage.
Finding this case was in line with the latter, the court held that United Stationers was not an additional insured under the CGL policy because:
1) United Stationers was not listed as an additional insured under the CGL policy;
2) the contract did not require Taylor to purchase a commercial general liability policy; 3) there was no evidence of intent by the parties that United Stationers was to be made an additional insured; and
4) the certificate of insurance had a disclaimer which put United Stationers on notice that the CGL policy controlled coverage of additional insured.
United Stationers is a reminder that the certificate of insurance should not be relied upon as evidence of coverage. An owner or contractor seeking additional insured status should insist on obtaining a copy of the policy endorsement listing the names of the additional insured. The terms of the endorsement should be carefully reviewed to determine the type of coverage provided. The Insurance Service Office (ISO) developed a series of standard endorsement forms that can be identified by a form number and date. The additional insured form is the ISO 20 10 form. Some policies may have a broad form endorsement which will apply to insured contracts with the named insured. A review of the contract should be made to ensure that you are named as an additional insured on the appropriate polices.
Y. Lisa Colon Heron
Member of the State Bar of Florida