Every contractor generally requires proof of insurance from its subcontractors, especially with respect to worker’s compensation insurance. In satisfaction of this contractual requirement, subcontractors commonly provide a certificate of insurance to the prime contractor. Is the certificate of insurance sufficient? It may not be.

Many certificates of insurance contain a disclaimer that the certificate is for informational purposes only and does not extend the policy. The disclaimer is a warning that you must look at the policy itself for specific coverage.

In Complete Roofing Services, et al. v. Doherty Duggan & Rouse Insurors, 5th Circuit Court of Appeals (5th Cir. 2009), a certificate of insurance was issued to a general contractor, but the worker’s compensation coverage denoted in the certificate was limited to occurrences only in Georgia. The subcontractor’s employee was injured in Mississippi. The court determined that the "Georgia only" policy did not provide coverage for the injured employee. As a result, the general contractor’s worker’s compensation was required to cover the claim. In this case, it was a catastrophic claim costing the worker’s compensation carrier over $1,000,000.

The best business "policy" is to always obtain and read the actual insurance policy itself. In reviewing the policy, take into consideration the circumstances related to each particular project. For example, consider the following factors: Is the subcontractor from another state? If so, are the subcontractor’s employees from another state or local? Is the subcontractor’s insurance policy state specific? If so, does it cover the state where the project is located? Will any leased employees be used for the project? If so, does the insurance policy cover leased employees or is other insurance required? Are there any warnings or disclaimers in the policy? If so, take heed and consider whether other additional insurance is necessary.

Although the Complete Roofing Services case dealt with a contractor/subcontractor relationship, these basic rules apply to any situation where one party contractually requires insurance from another party. The bottom line is this: get the full policy and read it. This applies to your own insurance policy as well!

(D. Drew Malone is a member of Robinson, Biggs, Ingram, Solop & Farris, PLLC who practices in the area of insurance defense. Drew personally handled this case and contributed to drafting this blog.)

  • Hello,

    And thank you for this post; we represent several heavy equipment supplies throughout the State of Georgia, and we have had to warn our clients of similar limitations to their insurance coverage. Your example (a Georgia contractor performing work in Mississippi) happens all too often. We are more concerned about smaller contractors–who may not have the resources or the contacts to get contracts several states away–who work on projects just across the state line. In Georgia, more and more projects seem to be closer to our state lines attracting nearby albeit out-of-state firms, so your posting will make us revisit the insurance question with our clients. Thank you! Best regards, Mark Cobb

  • This is a really good post and a really good topic. We frequently consult with equipment lessors or general contractors who expect insurance certificates from those leasing their equipment or working on their projects. They are all very surprised when we tell them the certificate itself means very little. And they have a right to be surprised – the warning that these certificates do not actually convey coverage isn’t loud enough.

    We practice in Louisiana, and the same problem exists here. I always recommend that clients look deeper in regards to insurance – to check with the insurance company, to get some more detailed and binding written confirmation from the agent themselves, etc.

    Good job.