A Primer on Certificates of Insurance
By: Stephen Smith
What is a “Certificate of Insurance”?
Generally, a Certificate of Insurance [“COI”] is a summary document, usually issued by an agent on behalf of an insurer, that says a policy has been issued to an insured for a general type of risk. The COI is usually issued to a third party who wants some evidence or assurance that a policy has been issued. “A certificate of insurance is a document issued by or on behalf of an insurance company to a third party who has not contracted with the insurer to purchase an insurance policy.” TIG Ins. Co. v. Via Net, 178 S.W.3d 10, 18 (Tex. App.—Houston [1st Dist.] 2005) (“TIG III”), rev’d on other grounds, 211 S.W.3d 310 (Tex. 2006) (“TIG IV”).
Conflicts Regarding Certificates of Insurance
Conflicts can arise where a certificate holder attempts to make a claim on or otherwise attempts to collect under the policy described in the certificate. Typically, insurance certificates have language similar to the following:
THIS CERTIFICATE IS ISSUED AS A MATTER OF INFORMATION ONLY AND CONFERS NO RIGHTS ON THE CERTIFICATE HOLDER. THIS CERTIFICATE DOES NOT AMEND, EXTEND OR ALTER THE COVERAGE REPORTED BY THE POLICIES DESCRIBED BELOW.
(See attached). Accordingly, by its own terms, a certificate is not an insurance policy. A policy of insurance is an indemnity instrument which is issued according to the regulations of the particular governing authority—in the United States, this is typically the particular state requirements. Normally, unless those requirements are met, a document cannot by law constitute an insurance policy. See, e.g., Tex. Ins. Code § 2301.054, et. seq. (Vernon 2019).
What a Certificate of Insurance Does Not Do
Texas has a fairly well-developed body of case law on the limitations as to the effect of a COI. While a COI does constitute evidence that the holder has some form of liability insurance, it does not describe coverage or create a contract of insurance. Scottsdale Ins. Co. v. Shahinpour, 2006 WL 870642 (S.D. Tex. 2006); TIG Ins. Co. v. Sedgwick James of Washington, 184 F. Supp.2d 591, 597-98 (S.D. Tex. 2001); Granite Constr. Co. v. Bituminous Ins. Co., 832 S.W.2d 427 (Tex. App.—Amarillo 1992, no writ). It does not confer insured or additional insured status on a party. Scottsdale, 2006 WL 870642 at *6; TIG Ins. Co., 184 F. Supp.2d at 597-98.
The language of the insurance policy always controls over a standard form COI. If a COI “contains language stating that the certificate does not amend, extend, or alter the terms of any insurance policy mentioned in the certificate, the terms of the certificate are subordinate to the terms of the insurance policy.” TIG, 184 F. Supp. 2d at 597. Moreover, a COI “will not suffice to create insurance coverage if such coverage is precluded by the terms of the policy.” Id.; see also Wann v. Metropolitan Life Ins. Co., 41 S.W.2d 50, 52 (Tex. Comm’n App. 1931, holding approved); Boyd v. Travelers Ins. Co., 421 S.W.2d 929, 932 (Tex. Civ. App.—Houston [14th Dist.] 1967, writ ref’d n.r.e.) (“The contention that appellee was estopped to assert the limiting provisions of the policy because of the failure of the [COI] to contain all of the provisions of the policy must be rejected.”); Granite Constr. Co., 832 S.W.2d at 431 (holding that policy controlled coverage despite conflicting with COI); Evanston Ins. Co. v. ATOFINA Petrochem., Inc., 256 S.W.3d 660, 667 (Tex. 2008).
The subjective intent of the parties to the certificate is irrelevant. “The Court holds that while there is some evidence of [the claimant’s] reliance on a belief that it was covered for subcontractors’ employees’ injuries, and this belief was not dispelled by the COI, the negligent misrepresentation or omission argument is untenable under Texas law.” Republic Ins. Co v. Mendez, 2008 WL 11502055 (S.D. Tex. 2008). Likewise, the intent of the agent or broker issuing the COI makes no difference. TIG Ins. Co. 184 F. Supp.2d at 600-01.
Causes of Action Based on Misrepresentation
As an alternative to securing coverage, claimants also have attempted to assert that issuing a COI, which indicates there may be coverage but which turns out to be nonexistent, constitutes a misrepresentation. Generally, these attempts have failed for one or more of the following reasons, depending on who is getting sued:
1. No actionable misrepresentation as to a purported additional insured, as someone claiming insured status is charged with the knowledge of an insured as to the content of the insurance policy. TIG Ins. Co., 184 F. Supp.2d at 602. A claim for misrepresentation cannot stand when the party asserting the claim is legally charged with knowledge of the true facts. Shindler v. Mid-Continent Life Ins. Co., 768 S.W.2d 331, 334 (Tex. App.—Houston [14th Dist.] 1989, no writ) (citing Sutton v. Grogan Supply Co., 477 S.W.2d 930, 935 (Tex. App.—Texarkana 1972, no writ)). This is a corollary to the rule that the insured has a duty to read the insurance policy and is charged with knowledge of its provisions. Ruiz v. Gov’t Employees Ins. Co., 4 S.W.3d 838, 841 (Tex .App.—El Paso 1999, no pet.); Pankow v. Colonial Life Ins., 932 S.W.2d 271, 277 (Tex. App.—Amarillo 1996, writ denied); Amarco Petroleum, Inc. v. Tex. Pac. Indem. Co., 889 S.W.2d 695, 699-700 (Tex. App.—Houston [14th Dist.] 1994, writ denied). An agent or broker is not liable for issuing a COI because, under Texas law, an insurance agent generally has no duty to explain policy terms to an insured. Ruiz, 4 S.W.3d at 841.
2. No actionable misrepresentation because claimant suffered no economic damages when its own insurer covered all costs and expenses. Therefore, the claimant suffered no economic losses recoverable damages under an insurance policy. In TIG v. Sedgwick James of Washington, because the claimant did not suffer any damages, the claimant’s insurer had nothing to subrogate as a result. TIG, 184 F. Supp.2d at 602. Subrogation is the “substitution of one person in the place of another as to a lawful right or claim.” In re Tex. Prop. and Cas. Ins. Guar. Co., 989 S.W.2d 880, 884 (Tex. App.—Austin 1999, no pet.) (citing Cockrell v. Repub. Mtge. Ins. Co., 817 S.W.2d 106, 113 (Tex. App.—Dallas 1991, no writ); Lancer Corp. v. Murillo, 909 S.W.2d 122, 127 (Tex. App.—San Antonio 1995, no writ)). A subrogee can have no greater rights than its subrogor. Cockrell, 817 S.W.2d at 113; Conversion Props., LLC v. Kessler, 994 S.W.2d 810, 814 (Tex. App.—Dallas 1999, no writ).
3. No actionable misrepresentation as to coverage due to the disclaimers of coverage in the certificate. TIG, 184 F. Supp.2d at 602; see also Granite, 832 S.W.2d at 429. “Simply put, an insured may not disregard a COI’s disclaimers and rely on its own belief that it is covered for a certain category of loss. Here, the disclaimers on the face of the COI were conspicuous. In light of these, [the claimant] should have requested and read the policy, at which point it would be clear that bodily injuries of a subcontractor’s employee would not be covered. [Both witnesses] stated that [the claimant] never took this step. A contracting party is required to exercise due diligence to protect its own interests.” TIG IV, 211 S.W.3d at 314; Mendez, 2008 WL 11502055 at *11.
Conclusions Regarding Certificates of Insurance
COIs have a valuable purpose, providing third parties with general insurance information about the status of an insured and the existence of an insurance policy. However, COIs do not contain any statements of coverage, nor do they confer additional insured status for all purposes. If exact coverage information is necessary, the full policy should always be requested and reviewed. “Given the numerous limitations and exclusions that often encumber [insurance] policies, those who take [COI’s] at face value do so at their own risk.” TIG IV, 211 S.W.3d at 314; Mendez, 2008 WL 11502055 at 11.