Certificates of insurance are a constant and growing challenge for insurance agencies. Once a simple document that provided basic information about an insurance program, they have become the focus of significant demands. Often, the party requesting a certificate demands that it include specific wording, and they will reject it if it does not meet their requirements. Handled properly, however, a certificate need not produce trouble.
A New Hampshire agent issued a certificate of liability insurance for his client, a pet grooming business. The client leased space in a commercial building owned by a real estate holding company. The certificate listed three policies: A Commercial General Liability/Pet Groomer’s Professional Liability policy; Workers’ Compensation; and an Animal Bailee/Business Personal Property policy. It listed, among other things, a $1 million per occurrence limit for Damage To Rented Premises. It also identified Cam-Sam (the holding company) as “an additional insured with regards to general liability.”
Eventually, the lease ended and the client moved out. Upon inspection, the landlord discovered significant damage to the premises. Can-Sam sued the pet groomer. It also filed declaratory action suits against its own insurer and the pet groomer’s insurer, requesting the court to order them to provide coverage. The groomer’s insurer denied coverage, saying that Can-Sam was not an additional insured and that their policy did not provide Damage To Rented Premises Coverage.
Can-Sam then sued the groomer’s insurance agent, alleging that the agent issued an inaccurate certificate on which they relied. They also alleged that the agent negligently issued the certificate of which they were “an intended and named beneficiary.” The agent asked the court to dismiss the suit.
The court ruled in favor of the agent. First, the judge disagreed with Can-Sam’s allegation about its additional insured status. The groomer’s insurer did not deny that Can-Sam was an additional insured. Rather, it denied that Can-Sam was an additional insured under the property insurance policy. Noting that the certificate plainly referred to the CGL policy regarding additional insured coverage, he said that it “plainly does not misrepresent Can-Sam’s” status as an additional insured. He added that the policy itself included an additional insured endorsement that covered Can-Sam.
The judge also found that the certificate accurately reflected the policy’s Damage To Rented Premises coverage and limit of insurance. While he noted that the question of whether the policy covered this loss was a separate one, the certificate itself was not misleading. It had the usual disclaimers about the listed insurance being subject to the terms and conditions of the policies. “The Certificate,” he wrote, “describes the coverage in terms of the Policy provisions, which are what they are.”
Lastly, the judge rejected Can-Sam’s argument that the motion to dismiss must be denied because the motion relied on the policy and the certificate, and the certificate must be inaccurate. The judge found the reliance to be proper. For these reasons, the judge dismissed the suit.
The lesson here for agents is straightforward. The agent issued a certificate that accurately reflected the coverage provided. Consequently, the judge refused to penalize the agent for the certificate. It appears that the landlord expected property coverage that was not in place. However, the judge’s opinion does not say whether that misunderstanding was the result of the agent’s action, the insured’s failure to request the coverage, or Can-Sam’s expectation of something that was not in the lease. Regardless, the certificate was accurate and the judge found no fault on the agent’s part.
This is a good example of why agents should avoid issuing certificates that add to the coverage provided by the policies. If there is an uninsured loss, and the agent issued a misleading certificate, his odds in court will not be good. An accurate certificate represents a good defense.
It can be difficult to issue a certificate that does not change coverage. Certificate holders put great pressure on insureds and their agents to enter specific wording on the forms. However, the benefit of staying true to the terms and conditions of the policy are evident – doing so can win a lawsuit.
