E&O Report | March 2024 | Volume 39, Number 3
We thought it would be interesting if we wrote this issue of the E&O Report in the form that would most likely be found in a legal memorandum than in a report. We hope you find it interesting.
The Issue
We are often asked this question. What is the effect on the carrier when a Certificate of Insurance, (“COI"), listing a party as an Additional Insured is issued? The answer is ...IT DEPENDS. It depends on who is issuing it. Is it issued by a Broker or the Agent of the Insurance Company or the company itself.
The Language of a Standard COI
The COI, by its explicit terms and in all caps and bold says that it cannot be relied on as to proof of coverage, as follows:
"THE CERTIFICATE IS ISSED AS A MATTER OF INFORMATION ONLY AND CONFERS NO RIGHTS UPON THE CERTIFICATE HOLDER. THIS CERTIFICATE AFFIMATIVELY OR NEGATIVELY AMEND, EXTEND OR ALTER THE COVERAGE AFFORDED BY THE POLICIES BELOW. THIS CERTIFICATE OF INSURANCE DOES NOT CONSTITUTE A CONTRACT BETWEEN THE ISSUING INSURER(S), AUTHORIZED REPRESENTATIVE OR PRODUCERS, AND THE CERTIFICATE HOLDER."
The Law – COI Issued by a Broker
Remember that an Insurance Broker is the Representative of the Insured, not the insurer. (Insurance Law §2101(c); Bohlinger v Zanger, 306 NY 228, 231 (1954). Also remember that an insurance broker is NOT a party to the insurance contract which is a 2-party agreement only between the Insured and the Insurer. Gilbane Bldg. Co./TDX Const. Corp. v. St. Paul Fire et al, 143 A.D.3d 146 (1st Dept., 2016) (“[a]n insurance policy is a contract between the insurer and the insured" (Bovis Lend Lease LMB, Inc. v. Great Am. Ins. Co., 53 A.D.3d 140, 145, 855 N.Y.S.2d 459 [1st Dept. 2008])." See also NY Ins. Law §101(a)(1). Therefore, when an Insurance Broker issues a COI to a party advising them that they are an Additional Insured on the contract of insurance, it is meaningless, and the courts then refer back to the COI's language as quoted above.
"It is well established that a certificate of insurance, by itself, does not confer insurance coverage, particularly [where, as here,] the certificate expressly provides that it is issued as a matter of information only and confers no rights upon the certificate holder [and] does not amend, extend or alter the coverage afforded by the policies, A certificate of insurance is only evidence of a carrier's intent to provide coverage but is not a contract to insure the designated party nor is it conclusive proof, standing alone, that such a contract exists" *
Landsman Dev. Corp. v RLI Ins. Co., 149 AD3d 1489, 1490 (4th Dept 2017).
The Law – COI Issued by an Agent/Carrier
Start with this. An actual “Agent"[1] of an insurance company, (with exceptions not relevant here), is one and the same with its Insurer-Principal. So, when an “Agent" issues a COI advising someone that they are an Additional Insured on the policy, it is the same as the carrier making that representation directly to the Additional Insured who has a right to rely on it. They can basically ignore all the language quoted above contained in the COI to the contrary.
In Niagara Mohawk Power Corp. v. Skibeck Pipeline Co., 270 A.D.2d 867 (4th Dept., 2000) the court said that the Agent “acted within the scope of its actual or apparent authority in adding Niagara Mohawk as an additional insured, we conclude that Aetna was bound by Whittingham's actions in issuing the certificate of insurance designating Niagara Mohawk as an additional insured.". The Court in Bucon, Inc. v Pennsylvania Mfg. Assn. Ins. Co., 151 AD2d 207, 210-211 (3rd Dept. 1989) had before it an insurance company that denied coverage to a contractor who had been named as an additional insured on a subcontractor's liability insurance binder claiming that the designation was a "clerical error". The Appellate Court agreed with the Lower Court that the insurance company was equitably estopped, (prevented) from denying coverage due to the contractor's reliance upon the certificate of insurance.
Finally, read the quote below from Sevenson Envtl. Servs., Inc. v. Sirius Am. Ins. Co., 74 A.D.3d 1751 (4th Dept. 2010):
“Nevertheless, an insurance company that issues a certificate of insurance naming a particular party as an additional insured may be estopped from denying coverage to that party where the party reasonably relies on the certificate of insurance to its detriment. For estoppel based upon the issuance of a certificate of insurance to apply, however, the certificate must have been issued by the insurer itself or by an agent of the insurer." (Emphasis added.)
Conclusion
If a carrier or its Actual Agent, captive or independent --- as long as it is the carrier's Agent, issues a COI that notifies a party that they are an Additional Insured, the carrier will be bound by its contents.
Submitted by:
Howard S. Kronberg, Esq.
Keidel & Cunningham, LLP
[1] Do NOT confuse the use of the term “Agent" meaning the Representative of the Insured with the above use of the term “Agent" in its correct technical and statutory definition as the Agent of the Insurance company.
Keidel & Cunningham, LLP concentrates its practice in the defense of insurance agents and broker's errors and omissions claims and litigation, errors and omissions loss control counsel and education, insurance coverage analysis and litigation and insurance regulatory matters. Please direct any comments or questions to James C. Keidel, Esq. by mail to the main office of Keidel & Cunningham, LLP, at 925 Westchester Avenue, Suite 400, White Plains, NY 10604, telephone at (914) 948-7000 or e-mail at jkeidel@kclawllp.com. The law firm also maintains offices in Syracuse, New York; New York City, New York; Wilton, Connecticut; Fair Lawn, New Jersey; Warwick, Rhode Island, Philadelphia, Pennsylvania, Williston, Vermont and Naples, Florida.