Cert Uncertainty

Waste Management provides solid waste transportation services. Waste Management entered into a transportation service agreement (the service contract) with WB Services Inc. (WB), another Pennsylvania corporation. Under the service contract, WB agreed to transport waste from the Forge Transfer Station—a waste transfer station located in Philadelphia, which Waste Management operates. The service contract required WB to indemnify Waste Management against any damages arising from any personal injury suffered at the Forge Transfer Station, including injuries suffered by employees of WB.

In addition, the service contract obligates WB to obtain certain insurance coverage, including workers' compensation, employer's liability and general liability, and to name Waste Management as an additional insured under its coverage. To evidence compliance, WB was required to deliver a certificate of insurance naming Waste Management as an additional insured before performing its waste transportation duties. The service contract permitted WB to hire subcontractors and obligated WB's subcontractors to comply with the terms and conditions of the service contract, including its insurance and indemnification provisions. WB subcontracted its waste transportation responsibilities to LU Transport Inc., (LU) an Illinois corporation.

Both WB and LU retained Invincia Corp. (Invincia) to obtain the insurance coverage required under the service contract. Invincia procured workers' compensation and employer's liability coverage from the National Union Fire Insurance Co. (National Union), general liability coverage from Delos Insurance Co. (Delos), and excess umbrella coverage from the Lexington Insurance Co. (Lexington). On June 12, 2008, Invincia produced certificates of insurance with respect to both WB's and LU's policies. The certificates indicated that the insurance coverage was effective from June 16, 2008, through June 16, 2009. Both certificates listed "Waste Management" as an additional insured for auto liability and general liability. Invicia did not obtain an endorsement from the insurer naming Waste Management as an additional insured. Contrary to the representations made in the certificates of insurance as to Waste Management the certificates recited the following in capital lettering:

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.

On the reverse side, both certificates of insurance state, "If the certificate holder is an ADDITIONAL INSURED, the policy(ies) must be endorsed. A statement on this certificate does not confer rights to the certificate holder in lieu of such endorsement(s)." [Emphasis added]

On Dec. 5, 2008, the plaintiff sustained injuries at the Forge Transfer Station operated by Waste Management. On Oct. 26, 2009, the plaintiff filed suit in the Supreme Court of New York, Kings County, alleging that Waste Management's negligent supervision over the Forge Transfer Station caused his injuries. Waste Management then removed this case to federal court.

The Litigation

On July 8, 2010, Waste Management filed a third-party complaint asserting claims against WB, LU, Invincia, National Union, Delos and Lexington. Waste Management's third-party complaint alleged that LU and WB are related entities and that the plaintiff acted within the scope of his employment at the time he was injured. With respect to National Union, Waste Management sought a declaratory judgment that National Union is obligated to defend and indemnify Waste Management as an additional insured under either or both of WB's and LU's policies.

Related: Read Zalma's article "Writer's Cramp."

Waste Management's third-party complaint attaches the service contract and the certificates of insurance as exhibits and they are therefore deemed part of the complaint. In addition, Waste Management's complaint relies heavily on the terms and provisions of the insurance policies that National Union provided to WB and LU. National Union submitted both policies in connection with its motion to dismiss.

Waste Management argued that dismissal of its claims against National Union would be premature because it should be entitled to investigate whether it is an additional insured under either or both of WB's or LU's insurance policies with National Union, and whether the plaintiff was employed by WB by operation of law. For the following reasons, neither argument has merit.

The court concluded:

The obligations of an insurer are governed exclusively by the contract and will not extend beyond the language of the policy. While ambiguity is resolved in favor of the insured, where the provisions of a contract are clear they must be applied in a manner that effectuates their plain meaning.

Because the policy clearly and unambiguously stated that the only agreements relating to this insurance are stated in the policy, the terms of the policy may not be changed or waived except by endorsement issued to be part of the policy. Because neither policy lists Waste Management as an insured or an additional insured covered under the policy, the clear language provides that Waste Management is not covered under either of the policies issued by National Union. The fact that Waste Management is listed as an additional insured on the certificates of insurance does not alter the court's conclusion. The policies clearly state that they may be amended only through an endorsement issued by the insurance company. No such endorsement was issued.

Related: Read the article "No Lie" by Barry Zalma.

Moreover, the certificates, which were issued by Invincia, state that they do not amend, extend or alter the coverage that is provided. Courts in both New York and Pennsylvania, when confronted with certificates of insurance that include similar disclaimers, have concluded that the certificates do not extend coverage beyond that which is provided for in the policy. Waste Management cannot establish that it is an additional insured under either WB's or LU's insurance policies with National Union.

Simply because a party is listed in a certificate of insurance as an additional insured does not make that party an additional insured.

Lesson learned

Certificates of insurance do not change the wording of a policy. An agent or broker issuing a certificate naming someone as an additional insured must be certain that the policy has been endorsed to name the additional insured. Failure to do so will expose the agent to errors and omissions litigation. The agent or broker must not issue certificates as a matter of course but are obligated to comply with its professional responsibility. Invincia, in the Waste Management case, failed to do what it was asked to do by its customers and exposed them and Waste Management to litigation that should not have been necessary.

Waste Management, and any insured like it, faced with certificates of insurance like those presented to Waste Management should protect itself by requiring presentation of a copy of the endorsement issued by the insurer naming it as an additional insured to avoid litigation and lack of coverage.