Why A Contractor's Certificate of Insurance Isn't Enough

In the fall of 2021, many boards and managing agents were dealing with water damage caused by the one-two punch of Hurricanes Henri and Ida. To repair damage and prevent mold growth, contractors, plumbers and electricians were immediately hired — in most instances on the basis of a short proposal and with the contractor or vendor providing a certificate of insurance.

While the need to mobilize mitigation and construction immediately after a disaster is of paramount importance, reliance solely on a certificate of insurance from a vendor or contractor can leave a building exposed to claims for property damage and personal injuries. Why? Because despite what a certificate of insurance might say on its face, a certificate alone provides no additional coverage. 

A certificate of insurance saying “XYZ Condominium, and its officers, board members, employees and agents are additional insureds” does not confer additional insured status. In terms of determining whether a building is actually an additional insured, the certificate of insurance is not, as they say, worth the paper it’s printed on.

Most often, a contractor’s commercial general liability policy includes what is known as a “blanket additional insured endorsement.” What makes an endorsement “blanket” is that it doesn’t specifically name one building or another as an additional insured; rather, it states that it will cover those buildings that the contractor agrees to cover as additional insureds in a written agreement; in other words, it provides a “blanket” covering all the buildings that the contractor agrees to cover as additional insureds in its many contracts (see example below).

Under this type of “blanket” endorsement, if a written agreement to perform work in the building states that the building must be named as an additional insured under the policies obtained by a contractor or vendor, then the building will be deemed an additional insured — regardless of whether a certificate of insurance is issued and regardless of what the certificate of insurance states. 

In many instances a certificate of insurance will state that a person or entity is an additional insured “to the extent required by written contract.” Accordingly, it is the language of the written agreement between the building and contractor or vendor (rather than the certificate of insurance) that triggers additional insured coverage for the building under the “blanket” endorsement. 

A failure to ensure that the building owner is an additional insured under the policies maintained by contractors and vendors through a written agreement can have adverse consequences to the building, which could include a significant increase in premiums, non-renewal of the insurance or uncovered claims. 

While a certificate of insurance does not confer additional insured coverage to a building, it does have benefits for a building and should always be collected. Certificates of insurance are important as they set forth the different types of insurance the contractor is carrying, the limits of insurance the contractor maintains, the name of the insurance company providing the insurance, and other important policy information. 

Knowing that boards and managing agents do not have the luxury of arranging for construction proposals to be reviewed by their attorneys and insurance professionals in emergency situations, here are a few ways boards and managing agents can protect a building’s interests: 

The first option is for boards and managing agents to create standard insurance and indemnity language to be inserted into every proposal stating that the building, its officers, members of its board, employees and agents are to be named as additional insureds under the policies maintained by the contractors and vendors. 

The second, and better, option is for the building to adopt a standard insurance and indemnification agreement that every contractor and vendor must sign. It can then be attached to any proposals from contractors or vendors.

The third and best option is to require any contractors and vendors that are typically used by the building to sign a master insurance and indemnification agreement on an annual basis. This last option ensures that the building will have additional insured status even in emergency situations when a contractor might perform work on a time-and-materials basis without a written agreement, reducing the paperwork for managing agents when a fast response is critical.

Scott S. Greenspun is a principal at the law firm Braverman Greenspun. Jillian Menna is general counsel for Genatt V Insurance Solutions.