If you own commercial property, manage it, or run construction projects, you collect certificates of insurance constantly. Tenants send them before move-in. Subcontractors and Vendors send them before they set foot on site. Most of those certificates get a quick glance, land in a folder, and are never looked at again until something goes wrong. Or, they are enrolled in electronic tracking that fails to warn of the dangers that hide behind those certificates.
That is when many owners and contractors discover what the certificate was really worth. Understanding what a certificate proves, and what it does not, is the first step toward proper protection.
The definition matters
A certificate of insurance is a document that shows evidence that certain types of insurance and certain limits have been purchased by the party required to provide it. That is the entire job of the form.
A certificate does not discuss the terms and conditions of the policy and it cannot guarantee that coverage will respond to a particular claim. It is limited to the information allowed by the template published by ACORD, the industry standards organization behind the forms you see every day.
The best way to think about a certificate is as a snapshot. It shows selected policy details, as allowed by the template, on the day the certificate was issued. The policy can be cancelled, endorsed, reduced by paid claims, or allowed to expire the next day, and the certificate in your file will look exactly the same.
What you can expect to see
On a standard ACORD 25 Certificate of Liability Insurance, you will find four groups of information:
- Insured information: the name and address of the party carrying the coverage.
- Agent information: the producing agency’s name, address, phone, email and an authorized signature.
- Carrier information: the writing company for each policy and its NAIC code.
- Policy information: policy types, policy numbers, effective and expiration dates, limits, and a limited set of policy conditions that ACORD and state regulations allow to be shown.
That is useful information. It tells you who the carrier is, whether the policies were in force on the issue date, and what limits were purchased. It is a reasonable starting point.
What the certificate says about itself
Every ACORD 25 carries a disclaimer at the top of the form, and that language has been sharpened repeatedly since ACORD first published a standardized certificate in 1977. The original disclaimer already stated that the certificate was issued as a matter of information only, conferred no rights on the certificate holder, and did not amend, extend or alter the coverage provided by the policies.
Over the following decades, ACORD broadened that language. Today’s form makes clear that the certificate is not a contract between the insurer, the agent and the certificate holder. It states that additional insured status and waivers of subrogation require endorsements, not just a certificate. It notes that the information shown is subject to all the terms, exclusions and conditions of the policies, and that aggregate limits may already have been reduced by paid claims. Since 2009, it has also stated that any notice of cancellation will be delivered according to the policy provisions, not according to a promise typed on a certificate.
In other words, the form itself tells you not to rely on it as proof that you are protected.
What a certificate cannot do
Because of how the form is designed, and because of the regulations that govern it in many states, a certificate cannot:
- Confirm that coverage applies “per the terms of the contract” between you and your tenant or subcontractor.
- Confirm that a particular exclusion does not exist or will not apply to your project.
- Make you an additional insured if the policy does not contain an endorsement that does so.
- Guarantee that you will be notified before the policy is cancelled.
- Promise that the limits shown will still be available when a claim is made.
When a requirement matters to you, the certificate is the wrong document to prove it. The proof lives in the policy and its endorsements.
Why this matters when there is a claim
In the event of a claim, the certificate will be pulled into evidence. The history of claims and lawsuits around certificates is long and expensive. Those disputes come from certificate holders who assumed they were covered and from parties named on certificates who believed coverage was extended to them.
Owners and contractors who treat the certificate as the final word often find, after a loss, that they were never added as an additional insured, that the endorsement on the policy only covered the party the insured contracted with directly, or that an exclusion on the policy wiped out coverage for the exact type of work being performed.
A better way to use certificates
Certificates still have a place in your process. Use them for what they do well: confirming the carrier, the policy numbers, the policy periods and the limits. Then take the next step.
In the posts that follow, we will look at the most common gaps we find when reviewing certificates for commercial real estate and construction clients, starting with the request that almost every owner has made at some point: asking the agent to confirm that coverage applies per the contract.