Owners always want to see the certificate of insurance (“COI”) from the general contractor. The general contractor wants to see the COI from its subcontractors. Parties want to see the COI from an entity they are hiring to confirm they have applicable insurance (proof of insurance) and so that the COI identifies them as an additional insured. (Importantly, just because an entity is listed as a “certificate holder” on the COI does not make them an additional insured; it just means they are being provided proof of the insurance identified in the COI. This is not additional insured status!) Without seeing the actual policy, specifically with respect to a liability policy, it is uncertain (a) what that entity is actually covered for and (b) what entities would be covered as an additional insured under the liability policy.
The summary judgment opinion in Bluewater Builders, Inc. v. United Specialty Ins. Co., 2013 WL 5670957 (S.D.Fla. 2013), demonstrates that a COI is not all it is cracked up to be. In this case, a general contractor sued its subcontractor’s CGL carrier for indemnification. The general contractor did so after it obtained a judgment against the subcontractor for water damage arising from the subcontractor’s work at a commercial high-rise officer tower. (Under Florida Statute s. 627.4136, the general contractor could not sue the subcontractor without first obtaining a settlement or verdict against the subcontractor-insured.) The insurer moved for summary judgment because the insured-subcontractor’s policy provided on the Declarations page that the policy covered the subcontractor’s operations for the following classification: “carpentry-construction of residential property not exceeding three stories in height.” Buewater Builders, 2013 WL at *1. The Declarations page further provided that coverage was strictly limited to this classification and that no coverage would be provided for any other classification. The policy did not cover the subcontractor’s work at a commercial high-rise tower.
The general contractor argued that the insurer should be estopped from relying on the exclusionary language in the policy because it received a COI from the subcontractor and it detrimentally relied on this COI in hiring the subcontractor. Specifically, the general contractor relied on the doctrine of promissory estoppel which applies when a “plaintiff detrimentally relies upon a defendant’s promise, the defendant should have expected the promise to induce reliance, and injustice can only be avoided by enforcement of the promise.” Bluewater Builders, 2013 WL at *3. However, the general contractor could not point to any promise the insurer actually made because the insured-subcontractor was the one that transmitted the COI. And, the COI did not state that it would insure the subcontractor’s work for the project; it was simply evidence of insurance without any “promise.” In fact, the COI at-issue is believed to have not even listed the insurer as the liability insurer for the subcontractor. Thus, the Court granted summary judgment in favor of the insurer finding there was no coverage for the subcontractor’s work at the commercial high-rise under the policy.
It is important to remember that the COI does not create an obligation for an insurer. This is demonstrated by the following portion of the Court’s opinion:
The Certificate [of Insurance] does not suggest that Defendant [insurer] would insure Ferman [insured-subcontractor], nor does it create some other obligation on Defendant’s part. Further insight into the preparation of the Certificate [of Insurance] is therefore inapposite to whether Defendant owes any obligation to Ferman or Plaintiff [general contractor] under the Policy.”
Bluewater Builders, 2013 at *4.
Remember, the COI does not create insurance coverage which is why it is always beneficial to see the policy and, as it pertains to additional insured status, to see the actual additional insured endorsement.
For more information on a third party suing a liability carrier, please see https://floridaconstru.wpengine.com/a-third-party-suing-a-liability-carrier/
For more information on additional insured status, please see https://floridaconstru.wpengine.com/understanding-your-rights-as-an-additional-insured/
Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.