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Why Do Certificates of Insurance Have Limited Value in Design and Construction? - YouTube
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the role that certificates of insurance
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play
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in design and construction is often
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misunderstood because many people place
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too much reliance on the fact that if
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they have a certificate of insurance
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then they're going to have coverage now
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we're all familiar with those
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certificates of insurance that a party
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will get from their insurance broker
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that lists out what sort of coverage
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they have what are the amounts of the
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coverage sometimes it'll list
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an additional insured sometimes it'll
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identify that there's been a waiver of
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subrogation
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and those documents are very important
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to collect i don't mean to suggest
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otherwise but what a lot of people don't
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understand
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in the design and construction industry
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is that those certificates themselves
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confer no coverage it's the policies
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in the endorsements underlying those
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certificates of insurance
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that confer coverage and so while
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you may have a piece of paper that says
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that you're an additional insured or
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that the party that you've hired
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carries a certain amount of insurance
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it's important to understand that those
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insurance certificates are nothing more
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than a snapshot
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in time and so in a claim circumstance
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when you reach into your file and you
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dig out that insurance certificate from
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several years ago
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it's a mistake to think that there's
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necessarily going to be coverage you
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know i like to joke that it's not like
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the back to the future movies where
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marty mcfly's family
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disappears from the photograph over time
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the ink
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on a certificate of insurance is not
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going to erase itself
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if the underlying coverage no longer
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exists okay
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and so if you get an insurance
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certificate for a policy on wednesday
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you need to understand that that policy
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might not be there on thursday and
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because design a construction project
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can stretch a number of years
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it's not uncommon to be digging into
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files and finding certificates that are
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several years old in a claim situation
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and then having to go about the exercise
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of finding out whether or not there
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really is any value
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to that certificate or not it's also
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worth remembering that the coverage that
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is identified in the certificate of
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insurance even if the policy
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continues to be maintained for years or
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whatever duration
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the amount of coverage available
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might be depleted through the payment of
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other claims made against the policy
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or through the payment of attorneys fees
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and costs associated with defending the
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insured form a claim
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and believe me if you require somebody
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by contract
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to carry a policy of insurance and then
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for some reason they let you down
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either because the policy isn't
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maintained from year to year
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or because the amount of coverage is
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used up for another claim
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you're not going to be very satisfied to
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make a breach of contract claim against
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them for not carrying
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insurance because the whole reason that
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you want insurance is
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because you want it to backstop a
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party's obligations
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and claims for failing to buy or
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maintain insurance coverage
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typically tend to be worthless in and of
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themselves so what are the best
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practices here
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absolutely to collect insurance
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certificates
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it starts with a good contract you have
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a good contract
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in the design and construction industry
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that's going to identify with
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specificity
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the kinds of insurance that's required
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the amounts of insurance that's required
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is there a waiver of subrogation who are
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the additional insureds
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you want to see a certificate of
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insurance
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but that is only the first step in a
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series of steps that you're going to
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want to take throughout the life of the
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project
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and afterwards in order to do what you
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can
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to increase the odds that if you ever
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need to call on that insurance
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you're not going to be disappointed to
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find that the coverage that's set out in
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the certificate of insurance is illusory
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because there is no actual policy
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standing behind that certificate of
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insurance
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