Certificates of insurance are ubiquitous in construction projects and in many other industries. But, as most jurisdictions hold, a certificate of insurance is not the functional equivalent of the insurance policy
and cannot be used to amend, extend or alter coverage. It is merely a piece of paper informing the recipients that insurance has been obtained. But what happens when an authorized agent of an insurance company makes a representation in a certificate of insurance about whether a party is an additional insured and, at the same time, the certificate disclaims its authority and ability to expand coverage? That is the question that the Ninth Circuit had before it and has certified to the Washington Supreme Court.
In T-Mobile USA Inc. v. Selective Ins. Co. of Am., No. 17-35932 (9th Cir. Nov. 9, 2018), the court was asked to resolve an insurance coverage dispute over whether a cell phone provider was entitled to coverage as an additional insured under a policy of insurance taken out by one of the contractor’s who built a cell tower that allegedly caused damage to a building. The contractor’s insurance company denied coverage and the case ended up in federal court on removal. The district court granted the insurance company’s motion for summary judgment and all of the cell phone provider’s claims were dismissed. On appeal, the circuit court stayed the case and certified a question to the Washington Supreme Court on the issue mentioned above. The Washington Supreme Court has accepted the certification, but has not yet set the case down as ready.
The agreement between the cell phone provider and the contractor required the contractor to maintain general liability insurance naming the cell phone provider as an additional insured and required the contractor to provide the cell phone provider with certificates of insurance documenting that coverage. The contractor obtained general liability insurance from the insurance company and the policy had an additional insured endorsement extending additional insured status to any entity where there was a written contract requiring the contractor to add that entity as an additional insured.
The insurance company’s authorized agent and insurance broker issued a certificate of insurance to the cell phone provider. The certificate, however, stated that it was issued as a matter of information only and conferred no rights upon the certificate holder, did not amend the policy and was not a contract between the insurer, the representative and the certificate holder. The certificate also stated that if the certificate holder was an additional insured, the policy must be endorsed. In a footnote, the court commented that the insurance agent had issued other certificates of insurance to the cell phone provider and there were no objections from the insurance company.
The insurance company initially defended the cell phone provider under a reservation of rights, but ultimately denied coverage because the cell phone provider was not named as an additional insured in the policy. The cell phone provider argued in the district court that the certificate of insurance conferred additional insured status on it because of the authorized agent’s representation in the certificate, which bound the insurance company.
In certifying the question to the Washington Supreme Court, the 9th Circuit noted that this was a case of two competing principles under Washington law. First, that under Washington law, an insurance company is bound by the acts and representations of its agent when those acts and representations are within the scope of the agent’s authority. Second, under Washington law, a certificate of insurance is not the policy and does not provide changes to coverage. Because the Washington Supreme Court had not ruled on this impasse, the circuit court did not wish to use its own judgment to predict how the court would rule. While there was a Washington intermediate appellate court that ruled on similar issues, the insurance broker in that case was not an authorized agent of the insurer so the precise question had not been reached.
The 9th Circuit determined that this question was important because of the intersection between two disparate principles of Washington insurance law that appear to conflict. The question certified, which the Washington Supreme Court can alter, was:
Under Washington law, is an insurer bound by the representations made by its authorized agent in a certificate of insurance with respect to a party’s status as an additional insured under a policy issued by the insurer, when the certificate includes language disclaiming its authority and ability to expand coverage?
This is an important issue as there are thousands if not millions of certificates of insurance issued every year and the consistency between certificates of insurance and the actual terms, conditions, provisions and endorsements of the actual insurance policies is sometimes lacking. It will be interesting to see how the Washington Supreme Court comes out on this.