Certificates of Insurance Do Not Create Policy Coverage Obligations
One of the issues that arises far too often in cases I handle is lack of understanding of the purpose or role of documents called “Certificates of Insurance.” A “Certificate of Insurance” is not an insurance policy – it has no insuring provision, no exclusions, and typically no terms or conditions. These “Certificates” are usually issued by agents, brokers, or other producers, not the actual insuring entity. In such a situation, the correct and limited purpose of a “Certificate of Insurance” is merely to certify that a policy was issued to the named insured for the specific period listed.
“Certificates of Insurance” do not provide coverage, nor do they confer any rights upon the certificate holder. When people assume that the “Certificates” represent coverage that does not exist on a policy, the “Certificates” become the subject of litigation. Most “Certificates” contain language on their face indicating that the “Certificate” is only issued as a matter of information and does not amend or alter the policy coverage. I have successfully litigated cases involving the following language, and obtained rulings that the subject “Certificate” did not create coverage:
I.
This certificate is issued as a matter of information only and confers no rights upon the certificate holder. This certificate does not amend, extend or alter the coverage afforded by the policies below.
II.
We certify that we have issued the policy to the Named Insured for the policy period as identified in this Certificate. Notwithstanding any requirements, terms or conditions of any contract or other document with respect to which this Certificate may be issued, the insurance is that which we customarily provide for the coverage indicated in Item 6 below. This Certificate is issued as a matter of information only and does not amend, extend or alter the coverage afforded by the policy.
Now, the producer issuing the “Certificate” may face liability for failing to accomplish the directions of its client. But, absent any misrepresentation or conduct estopping the insurance carrier from denying that coverage exists, “Certificates of Insurance” should not create coverage.
"But the agent..." - Ending the Litigation Tactic of Blaming the Agent
In litigating coverage cases on behalf of insurance carriers, I often hear – “But, my agent said…” or “But, I told the agent that…” In Tennessee, juries still hold litigants to a degree of personal accountability and responsibility, particularly when they have had the opportunity to read the document about which they may be claiming ignorance. Often, I have been successful in convincing juries that an insured was simply incorrect about the representations of an agent (either by innocent failure of recollection or otherwise), or that is was simply unreasonable for an insured to have relied upon the representations of an agent when faced with application provisions or clear policy provisions in documentation they have received. .
Our appellate courts have aided this cause in the past two years, through two significant cases imputing knowledge to applicants and insureds when information was readily available. Most recently, in the case of Tennessee Farmers Mutual Insurance Company v. Farrar, No. E2008-00779-COA-R3-CV, filed April 30, 2009, the Tennessee Court of Appeals held that an unintentional misrepresentation regarding the ownership of property was material, and increased the risk of loss, such that the policy could be voided from inception. In this case, the applicant had failed to disclose the existence of a life estate, and the testimony from the underwriter for the carrier was that, had the life estate been disclosed, the holder of the estate would have been required to complete a form entitled “additional named insured application for insurance,” and the form would have been submitted to the company’s home office. The policyholder argued that it would be speculation as to how the policy form would have been answered. The court did not accept the argument, however, noting:
The point, however, is not what he might have answered; the point is that because the life estate was not disclosed, the Company never had an opportunity to ask him questions so it might evaluate the risk associated with the dual ownership of interests of the Claimant and Mr. Volheim. As a holder of a life estate, Gary Volheim has a right to possession and enjoyment of the property to the exclusion of Mr. Farrar….As the company puts it, ‘Based on [the Claimant’s] application, [the Company’s] Underwriting Department had no knowledge that the right to present possession and enjoyment of [the property] was actually vested in Gary Lee Volheim, a man that [the Claimant] described as mentally ill, an alcoholic, and a paranoid schizophrenic.’
The court also noted that the applicant had signed the application, but apparently did not read it. The court held:
The Claimant’s signature binds him as a matter of law to the representations in the signed document and he may not now attempt to rely upon alleged oral statements to or by the insurance agent to avoid the effects of his own negligent failure to read the application.
The Tennessee Court of Appeals has also addressed a situation where an agent allegedly made a representation that coverage would be provided for particular losses, when the policy issued did not provide such coverage. The Court noted:
In this case, the commercial fire policy with Shelter states that its terms “can be amended or waived only by endorsement issued by [Shelter Insurance Company] and made a part of this policy.” Ms. Finchum admitted that she received the policy. The terms of the policy unambiguously excluded coverage for damage or loss due to theft, and stated clearly that only Shelter Insurance had authority to alter or amend the terms of the policy. This language was clear notice to the Plaintiffs that neither Davenport nor Patterson had the authority to alter the provision in the policy excluding coverage for damage or loss due to theft. Moreover, the Plaintiffs do not allege that Davenport misrepresented that she had authority to alter the policy. They assert only that they did not read the policy. The plaintiff in Reed made a similar assertion; in response, the Reed court stated: “While the plaintiff alleges that he did not read the documents, it is settled law in Tennessee that he is nonetheless charged with knowledge of their contents.” Id. at *3 (citations omitted). We agree.
Finchum v. Patterson, 2008 WL 2019408, 7 (Tenn.Ct.App.,2008)
These cases emphasize than an applicant or insured has a duty to read materials, and will be presumed to know the contents of documents available to or signed by them. These holdings reflect reality, in my opinion. Many times during jury selection, I have asked “How many of you have ever read your insurance policies?” For many years, nary a hand was raised. However, in recent trials, particularly after Hurricane Katrina, I have seen quite a difference. In fact, in one trial, every single member of the jury indicated that he or she had actually read their insurance policies.
