1. Blades, Crout & Proulx LLC
Risk Management Consultants - Established 1926
148 West End Avenue, 2nd Floor, Somerville, New Jersey 08876 | Phone: 908-687-3735 | Fax: 908-687-2040
The Dangers of Relying on a Certificate of Insurance Alone
What is a Certificate of Insurance? It is no more than a snap shot on the day the certificate is
printed of the following information.
o Types of insurance policies in effect (General Liability, Automobile, Umbrella,
Workers’ Compensation, etc.)
o Insurance Companies issuing those policies
o Effective dates of coverage
o Limits of insurance
o the Insured
o the insurance agent
o Certificate Holder
o Check boxes for additional insured and waiver of subrogation
o Lots of language to advise the certificate holders that at the end of the day, a
certificate is a piece of paper with ink on it and has no value.
What is the purpose of requesting a certificate of Insurance?
There are two primary reasons for asking for a certificate.
1. To prove that a subcontractor has the insurance coverages and limits required.
2. Peace of mind for the General Contractor (GC)/Owner evidencing that they have
coverage on the policy as an “Additional Insured” (AI).
So how does the insurance/risk manager know the above are being met?
One of the many shortcomings of a certificate of insurance is its failure to show what the AI
wording is and to what extent (if any) the certificate holder is listed as an AI. There are hundreds
of versions of “additional insured” endorsements and all are not created equal. The Insurance
Services Office (ISO) standard “blanket additional insured” endorsement will be automatically
triggered if there is a written agreement between two parties requiring the GC/Owner be named
as an AI on the subcontractor’s commercial general liability (CGL) policy. Most carriers have
adopted some variation of the standard ISO “blanket additional insured” to free up underwriting
offices from having to individually underwrite each request for additional insured status. This
often has not proven to be a positive situation for the GC/Owner seeking to be protected as
additional insured under someone else’s insurance policy.
The problems we see with these various blanket additional insured endorsements are numerous.
Most insurance companies have adopted only parts of the ISO standard wording and crafted it to
be even less favorable and reduce the coverage grant typically seen on a standard ISO AI
endorsement.
Please visit our web site – www.bladesrisk.com

2. Blades, Crout & Proulx LLC
Risk Management Consultants - Established 1926
148 West End Avenue, 2nd Floor, Somerville, New Jersey 08876 | Phone: 908-687-3735 | Fax: 908-687-2040
For example, even in the ISO standard blanket AI, there is a requirement that two parties
have agreed in writing for the coverage trigger. Very often a construction contract seeks
indemnification through various tiers of owners/GC’s, and there are several contracts in
play at the same time. Does the owner have a contract with the subcontractor’s sub?
How is it possible for the lowest tier subcontractor to have a written agreement with the
project owner? Keep in mind, the coverage trigger for the Owner as an AI, requires a
written agreement between the two parties. Case law has already ruled against the owner
and GC seeking protection under the AI in this situation.
Another shortcoming of certificate is the absence of disclosing coverage restrictions that many
insurance companies have added to insurance policies. Some examples of serious potential
restrictions of coverage in an insurance policy commonly seen include, cross suits exclusions,
redefining an insured contract under contractual liability, warranty of subcontracted work, and
sharing of other insurance clauses. Any of these changes in an insurance policy can spell
disaster for the upstream GC/Owner. There is no way to know if these hidden bombs exist
simply by obtaining a certificate of insurance. These types of changes are incorporated into
insurance policies by standard on nonstandard insurance companies alike. It doesn’t matter if
they are small regional carriers or national carriers, most carriers have AI forms that are not
favorable and may prove to be unenforceable if the restrictive terms of the endorsements are not
met. It is not safe to assume that a subcontractor, not matter how large or with what insurance
company they have their insurance with does not have one or more of these harmful
endorsements or exclusions that may preclude coverage to the GC/Owner. There is no way to
know simply by collecting a certificate of insurance without other documentation, even if the
certificate states that the certificate holder and other entities are listed as AI.
A New Era
Times have changed. In today’s insurance world, astute risk and insurance managers can no
longer accept certificates of insurance without requiring the actual or specimen AI forms and
cross referencing them for compliance with insurance requirements in the contract with the
subcontractor. In addition, insurance and risk managers should be reviewing the CGL list of
forms and endorsements to identify any potential problematic endorsements and/or exclusions
that insurance policy and are not reflected on the certificates of insurance which may potentially
deny coverage of the GC/Owner seeking coverage under the subcontractor’s insurance policy.
Even then, greater controls need to be exhibited when the subcontractor uses a subcontractor
under their own contract.
Please visit our web site – www.bladesrisk.com

3. Blades, Crout & Proulx LLC
Risk Management Consultants - Established 1926
148 West End Avenue, 2nd Floor, Somerville, New Jersey 08876 | Phone: 908-687-3735 | Fax: 908-687-2040
Closing the loopholes in how a subcontractor’s CGL policy will respond as an additional insured
is an essential part of a sound risk management/ risk transfer plan. Closing these gaps requires
diligence in reviewing the insurance policies that subcontractors and vendors have in place.
Relying on the certificate alone is a dangerous and may not accomplish what the Owner/GC
intended as part of the risk transfer plan. The time to negotiate the proper insurance coverage
from your subcontractors is now, not when the claim occurs. In order to properly protect the
“additional insured” status, one needs to have a uniform plan regarding procedures in the
acceptance of the evidence of insurance. This procedure needs to include the subcontractor
along with downstream subcontractors to provide maximum protection upstream.
Ronald G Hicks, CIC, CRIS
Blades, Crout, and Proulx, LLC
Risk Management Consultant
908-687-3735 x16
Please visit our web site – www.bladesrisk.com

4. Blades, Crout & Proulx LLC
Risk Management Consultants - Established 1926
Please visit our web site – www.bladesrisk.com