Introduction to Certificates of Insurance

Most commercial agreements (e.g., leases, service contracts or vendor agreements) contain
risk allocation and insurance provisions that require one party to accept responsibility for
certain loses and to obtain a sufficient amount of insurance to be able to meet their
financial obligations should losses occur. Certificates of insurance are the customary
method of showing that he party providing the certificate has met their insurance
requirements.
What is a Certificate of Insurance?
A certificate of insurance is a document that is issued by an insurer or their authorized
representative (such as an insurance agent) that provides evidence that a company has a
policy in-force. The certificate usually summarizes the essential terms, conditions and
duration of the specified policy at the time that the certificate is prepared.
Typical information that is provided includes: contact information for the insured, the
broker or agent issuing the certificate, and the person being issued the certificate; the
names of all insurers providing coverages documented on the certificate; the policy
number (s); a description of the types and limits of insurance; the coverage dates; and a
signature of the insurer’s agent or representative. In addition, the certificate should include
any special insurance requirements that have been specified in the commercial agreement
(e.g., the naming of the certificate holder as an additional insured).
Certificate Forms
Certificates of insurance are published in three basic forms. Most certificates are printed
using standardized forms developed by ACORD (Agency-Company Organized Research
Development), an insurance industry organization. ACORD revises these forms as issues
arise. The certificate requestor or provider may modify the basic ACORD form to address
specifically identified form deficiencies. One common modification is replacing the
ACORD statement that the carrier will “endeavor to notify” the certificate holder in the
event of cancellation, with more specific notice requirements. The certificate requestors or
providers also may develop their own form (i.e., “manuscript forms”). Because manuscript
forms are non-standard, it is often difficult to have such forms completed, and their use is
limited to companies with large market power or for large projects.
Benefits of Certificates
There are several benefits to using certificates, rather than requesting certified copies of
the policies themselves. The primary benefit is convenience. The certificate can be
obtained quicker and easier, and require fewer resources to review and store, than the
policy itself. It can be used to demonstrate the coverage that existed at a particular time
and provide the basic information that will be needed in the event a claim is filed or a
dispute arises.

The certificate will not contain any confidential business information that would be part of
the policy, such as company sales or payroll information. Also the certificate holder is less
at risk for inadvertently waiving potential coverage arguments for failure to adequately
review the policy.
Limitations of Certificates
There are several limitations to the use of certificates. A certificate of insurance only
confirms that the certificate provider carried the specified insurance at the certificate was
prepared. It does not guarantee that the insurance will not be cancelled after certificate
insurance and before the completion of contractual arrangement, that the coverage limits
will not be exhausted by other claims, that all required endorsements have been added to
the policy, or that the policy does not contain other endorsements that reduce coverage,
which are not included on the certificate.
Most importantly, a certificate of insurance is not the legal equivalent of a policy and does
not create a contractual relationship between the certificate holder and the insurance
company issuing the policy. This is reinforced by disclaimers placed in the standard
ACORD forms that the certificates are for “informational purposes only” and do not
“amend, extend, or alter the coverages afforded by the policies.” Because of this, as a
general rule, courts will enforce the language of the policy over the certificate of insurance
in the event of a conflict between the two documents.
Reviewing Certificates of Insurance
Certificates of insurance are used in many commercial contexts as proof that the person
providing the certificate has a policy of insurance in effect. The certificate usually
summarizes the essential terms, conditions and duration of the policy at the time that the
certificate is prepared.
Although a certificate is not the legal equivalent of the actual insurance policy, they are the
customary means of verifying insurance coverages since they are much easier for
certificate providers to obtain, than the policies themselves, and for the certificate holder to
review and store. These are key areas that you should review before accepting a certificate
as proof of insurance.
Types of Certificates
Unless you specify otherwise, most companies will provide certificates based on
standardized forms published by ACORD (Agency-Company Organized Research
Development). These forms provide basic information about the companies providing the
coverages, details on the policies in effect, and any special insurance requirements that
have been requested (e.g., naming of your company as an additional insured). ACORD 25
is the basic certificate of insurance used for liability insurance.

Certificate Review
You should review all certificates provided to you for accuracy and for conformance to
your specified insurance requirements. This initial review can reduce the occurrence of
disputes later on, in the event you must file a claim. Important areas of review include:
• Is the certificate of insurance provided on a proper form?
• Is the company named on the certificate precisely the same name that is in the
contract?
• Have you been named as the certificate holder?
• Has (have) the policy (policies) been issued by (a) reputable insurer(s)?
• Has the certificate been signed by an insurance company or agency representative?
• Are the types and limits of insurance listed on the form the same or greater than
those required by you under the contract?
• Is (Are) the policy number (s) listed in the certificate?
• Are the dates of coverage adequate for the specified work?
• Are the notice of cancellation provisions acceptable?
• Does the certificate indicate all the special insurance requirements that you have
specified?
• Does the certificate cite the contract number or job location to tie the insurance to
the work?
• Has the provider made any unapproved modifications to the certificate?
Deficient Certificates
You should develop a procedure for responding to deficient certificates. At a minimum,
this should address providing the certificate provider with written notice of any identified
deficiencies and requiring that the contractor provide a corrected certificate before they are
allowed to start work. Contract documents also should clearly state any penalties for
failing to provide the certificate.