Certificates of Insurance May Confer Coverage

Certificates of insurance are a common tool used in the construction industry to provide proof of insurance coverage. The legal effect of certificates of insurance has been a source of debate in Washington. Insurance companies have argued that certificates of insurance are “informational only” and do not alter the terms of the applicable insurance policy. Insurance companies have taken the position that if a certificate of insurance provides for coverage that is different than what the policy provides, the insurance company is only bound to provide what the policy provides.

The Washington State Supreme Court weighed in on this issue in an opinion issued on October 10, 2019, and held that an insurance company is bound by the terms of its certificate of insurance – even if it conflicts with the policy. In T-Mobile USA, Inc. v. Selective Insurance Company of America, Selective’s agent issued a certificate of insurance to “T-Mobile USA, Inc., its subsidiaries and affiliates” and stated that those entities were “included as additional insured” under the policy. The certificate of insurance was issued by Selective’s agent when T-Mobile’s contractor purchased an insurance policy from Selective for a cell tower project. The contractor’s agreement for the project was with T-Mobile Northeast – not T-Mobile USA. The contract between T-Mobile Northeast and the contractor stated that T-Mobile Northeast would be an additional insured. The Selective insurance policy stated that any third party would automatically be an additional insured if the contractor was required to name the third party as an additional insured. The contract did not provide that T-Mobile USA would be an additional insured.

A property owner damaged by the cell tower project sued T-Mobile USA. T-Mobile USA tendered the claim to Selective. Selective denied the claim because the contract between the contractor and T-Mobile Northeast did not require the contractor to name T-Mobile USA as an additional insured.

T-Mobile USA sued Selective and argued that Selective was bound by the terms of its certificate of insurance issued by its agent, which stated that T-Mobile USA was an additional insured. Selective argued that the certificate of insurance did not confer coverage and it was only bound to provide coverage as required under the policy. Selective also pointed to various general disclaimers in the certificate of insurance that the certificate does not amend, extend, or alter coverage under the policy and that the certificate does not confer rights to any certificate holder that is contrary to the policy.

The Washington State Supreme Court held that Selective was bound by the actions of its authorized agent. Its agent had apparent authority to issue the certificate of insurance. The general disclaimers in the certificate of insurance did not supersede the specific language in the certificate that conferred additional insured coverage to T-Mobile USA specifically.

Comment: This case is a victory for contractors and owners in Washington. Most contractors and owners have been relying upon certificates of insurance as proof of insurance. This case provides some certainty to owners and contractors – based on the facts presented in this case – that the insurance company may be bound to provide coverages provided in the certificate of insurance even if it is different than the terms of the insurance policy.  It is important to note that in this case the agent was delegated authority by Selective to execute “policies” and “certificates of insurance.”  Contractors and Owners should still, in best practices, confirm coverage under the applicable insurance policy.

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