Certificate of Insurance (COI)

A certificate of insurance is a standardized summary form issued by an insurer or an agent to someone who is not the policyholder, stating that a policy is in force and setting out the types of coverage, the limits, the policy numbers and the policy period. It is the document a business is asked for when a client, landlord, venue or general contractor wants proof of coverage before work begins. New York's Department of Financial Services describes it as "a commercial document that is used within the insurance industry to provide evidence that the insured named on the form has insurance coverage in place" and states plainly that "a certificate of insurance is not a contract, and is not required by statute or regulation." The party it is addressed to is the certificate holder, which is a mailing label rather than a status under the policy.

Evidence is the whole of its job, and that boundary is enforced. Because a certificate reports on a policy rather than forming one, the question it can answer is "does this coverage exist today," not "will this coverage respond to my claim." New York's insurance regulator has said that a certificate may not name an entity as an additional insured unless the referenced policy actually includes that entity, reasoning that the purpose of the document "is merely to provide evidence of insurance, and as such, it may not alter the terms of the policy." The corollary a contract reviewer needs is that a certificate holder and an additional insured are two different things, which is the subject of its own page and not repeated here.

In a regulating state the form is filed, approved and policed, which is the part most people do not know exists. Texas is the clearest example. Chapter 1811 of its Insurance Code, added in 2011, requires that a certificate issued for a risk located in Texas be on a form approved by the Texas Department of Insurance, regardless of where the certificate holder sits, and the department's own guidance says a certificate "cannot say anything that is not the same as what is stated in the insurance policy." Two specific prohibitions do most of the work. Section 1811.154 provides that "a certificate of insurance may not contain a reference to a legal or insurance requirement contained in a contract other than the underlying contract of insurance, including a contract for construction or services," so the common request to have the certificate recite a construction contract's insurance clause is not merely unhelpful, it is prohibited. Section 1811.155 deals with cancellation notice: a person has a legal right to notice "only if" they are "named within the policy or an endorsement to the policy" and the policy, endorsement or a state law requires the notice, and "a certificate of insurance may not alter the terms and conditions of the notice required by a policy of insurance or the law of this state." A certificate promising thirty days' notice is therefore worth exactly as much as the underlying policy makes it worth. Violations carry cease and desist orders, injunctive relief, administrative penalties and civil penalties of up to $1,000 for each infraction, and the department notes those can reach certificate holders as well as agents and insurers.

The blanket-endorsement answer is the one that trips up contract reviewers. Many liability policies carry a blanket additional insured endorsement, which extends the status automatically to anyone the insured has agreed in a written contract to add. Asked whether a certificate may name a holder as an additional insured when the policy contains only a blanket endorsement, Texas's regulator answers no, "though the certificate can state that the policy contains a Blanket Additional Insured endorsement." The same answer is given for a blanket waiver of subrogation. So a certificate that looks thinner than requested may be describing perfectly adequate coverage, and a certificate that says exactly what was asked for may have been issued in violation of the law.

What the certificate cannot show at all. A limit printed on a certificate is the policy's limit, not the amount remaining. A general aggregate partly consumed by earlier claims still prints at its full stated figure. The form also does not reproduce exclusions, deductibles, or the wording of the endorsements it references, and it is a snapshot: a policy cancelled the week after issue leaves the certificate looking exactly as it did. The practical answers are to ask for the policy and the endorsement, which Texas's guidance confirms its certificate statute does not prohibit an agent or insurer from providing, and to ask the insurer directly for confirmation of status. One boundary worth noting is that Texas's chapter does not reach the evidence-of-property-insurance forms a lender requires in a mortgage or other secured lending transaction, which are governed separately.

1. A contract asks for proof. A client, landlord, venue or general contractor requires evidence of coverage, often with specified minimum limits, before work starts.

2. The agent or insurer issues the certificate. It is produced from the policy record on a standard form, most commonly the industry's ACORD 25 for liability coverages, or in a state such as Texas on a form the department has approved.

3. The certificate holder reads it as a summary. Coverage types, limits, policy numbers, effective dates and any referenced endorsements appear; the policy language does not.

4. Anything beyond the policy is removed or refused. A request to recite the construction contract, to promise notice of cancellation the policy does not require, or to name an additional insured the policy does not include is what the state rules prohibit.

5. Real assurance comes from the policy documents. The endorsement text and, where appropriate, confirmation from the insurer are what a contract reviewer can rely on.

Consider an example. A general contractor requires each trade to carry general liability limits of $1 million per occurrence and $2 million in the general aggregate, and the electrician's certificate prints exactly those figures. What the certificate cannot show is that two earlier claims on the same policy year have already paid $700,000 and $500,000, so the aggregate available for the rest of the year is $2,000,000 less $1,200,000, or $800,000. The certificate is accurate and the coverage is thinner than the contract contemplated. A loss-run report from the insurer answers what the certificate cannot.

Pros

• It is quick, free to the requester and standardized, which is why it is the normal way to evidence coverage before work starts.
• It comes from the insurer or the agent rather than the insured, so the figures are not self-reported.
• In states that regulate the form, its contents are constrained by law, which makes a compliant certificate a reliable summary of what the policy says.
• It names the policies and endorsements, giving a reviewer the references needed to ask for the documents that matter.

Cons

• It creates no coverage and confers no rights. A certificate naming someone as an additional insured where no endorsement exists gives them nothing.
• Printed limits are the policy's limits, not what remains after earlier claims.
• It says nothing about exclusions, deductibles or the wording of the endorsements it lists.
• It is accurate only on the day of issue, and policies are cancelled, non-renewed and amended afterwards.
• Requesting stronger language on a certificate can ask an agent to break a state rule rather than improve anyone's position.