CERTIFICATES OF INSURANCE: Understanding the Difference Between What Is Requested and What The Insurance Company Provides


Many business contracts require one or both parties to maintain a certain level of general liability, commercial automobile, umbrella/excess liability, and other specialized forms of insurance coverage. There can also be a further requirement that one or both parties be added as an additional insured to the liability policies of the other party. The most common way to determine if the other party maintains the required insurance coverages and has carried out its obligation to name the other party as an additional insured is to require that the other party provide it with a Certificate of Insurance. There are frequently provisions in business contracts that attempt to dictate the type of information that must be included on a Certificate of Insurance. The following is a commonly worded provision in a business contract:

Before [Company A] commences performance under this Agreement, [Company A] shall deliver to [Company B] certificates of insurance evidencing the insurance coverage listed below and [Company A] shall add [Company B] as an additional insured on the policies providing liability coverage. The certificates of insurance and policies shall contain a provision that no cancellation or non-renewal of, or material changes in, the policies shall become effective except upon thirty (30) days written advance notice thereof by the insurance company to [Company B], and that unless such notice is given, the purported cancellation will be ineffective.

Although these type of provisions requiring that the insurance company notify the certificate holder or additional insured in advance of the cancellation, non-renewal or material change in the insurance policies are quite common, they are contrary to the terms of the current standard Certificate of Insurance, and frequently in conflict with the express terms of the insurance policy and governing law. As such, they may provide no actual protection to either contracting party.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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