The Often-Misunderstood Certificate of Insurance
- Rabih Hamawi
- Apr 25
- 6 min read
By Rabih Hamawi, CPCU®, CIC, CRM, LIC, MSF
Copyright © 2025 Rabih Hamawi
It would be hard to find anything in the area of liability insurance that is more misunderstood than the certificate of insurance. It’s frequently called the “ACORD” form because these words appear at the top. Over my last 20 years in the business, both as an attorney, and previously as an insurance agent, I have talked to many insureds that referred to ACORD as the insurer, but that’s obviously not true.¹
At the root of this misunderstanding are two misconceptions: first, the insurer issues the certificate; and second, the certificate amends the policy. Neither is true. Yet attorneys who counsel commercial insureds may have a hard time convincing their clients that the certificate does not protect them and may not even be worth the paper it is printed on.
Here’s an example. There’s a construction project with a general contractor (GC) and one or more subcontractors. The GC is worried about being sued if someone is injured and may be seen as the target defendant with the deep pockets. How does the GC protect itself? First, of course, it buys a commercial general liability policy, with perhaps a large excess policy. But that’s not enough.
The GC wants to be sure that the subcontractors have insurance, so their pockets are also deep. To confirm, the GC insists on getting proof of insurance from each sub, listing its policies, and the amounts of coverage provided by each, hopefully with limits equaling or exceeding the GC’s policy limits. The subcontractor contacts its insurance agent, and obtains a certificate, which confirms that the subcontractor is insured. It is like the certificate of insurance we all carry in our cars. That certificate confirms to the Secretary of State that the car is insured, but it does not make the Secretary of State an insured.
It’s the same with the ACORD certificate of insurance form. It shows that the subcontractor is insured, but that’s all it does. It yells in all caps and bold letters that it is issued for information only and that it isn’t a policy or a policy endorsement.
Then it certifies that the policies of insurance listed below have been issued to the insured named on it for the policy period indicated.
If the ACORD is so clear, what is the confusion then?
At the bottom left, there is a box entitled “certificate holder.” That is where the GC’s name goes in our example. But often, instead of just saying “XYZ General Contractor Company,” the box gets filled in with something more specific: “XYZ General Contractor Company is an additional insured on project 123.”
Seeing this, the GC thinks it is protected as an additional insured, but Michigan cases don’t agree for a few reasons. The certificate is not a part of the policy, and it is not issued by the insurer. The Michigan Supreme Court has held that “The certificate is no[t] part of the insurance contract.”²
The Michigan Court of Appeals made the same point stating:
[T]he insurance certificate at issue did not purport to represent the terms, benefits, or privileges promised under the policy. Instead, the stated purpose was merely to certify that the listed insurance policies had been issued.³
The certificate is not a part of the policy because it isn’t issued by the insurer. At the top, in the space marked “Producer,” the insurance agent issuing the certificate inserts his or her name. In other sections, the insurance agent lists the name of the insurer, with the policy number and effective dates, but this may not be enough to guarantee that coverage has been issued or to bind the insurer because, generally, an independent agent is the agent of the insured and not the agent of the insurer. “[T]he independent insurance agent or broker is considered an agent of the insured rather than an agent of the insurer.”⁴ Usually, the insurance agents that contractors deal with are independent agents. The contractor comes to the agent with a list of coverages it needs (typically auto, worker compensation, liability, and excess) and the independent agent solicits bids from various insurers. Generally, the independent agent can’t usually speak on behalf of the insurers, and it can’t change the policies those insurers have issued.
So, is the ACORD worthless? Not at all, though it is worth less than what the GC and the subcontractor often think. Often the subcontractor’s policy will have a provision that identifies who else besides the sub is insured under the sub’s policy. Commonly this is found in an endorsement called a “blanket additional insured (BAI) endorsement,” or some variation on that title. The provision will say that an additional insured includes anyone the sub is “required to add as an additional insured under this policy under . . . an oral agreement or contract where a certificate of insurance showing that person or organization as an additional insured has been issued.”
So, the certificate can have an effect, but note that it is the endorsement that really does the heavy lifting. Also, if the GC, or its attorney, is paying attention, somewhere in the contract between the GC and the subcontractor, there will be a requirement that the sub makes its insurer add the GC as an additional insured on the sub’s policy. If this clause is in the sub’s contract with the GC, then that alone is generally enough to make the GC an additional insured, with or without a certificate. The BAI endorsement may also automatically include as an additional insured anyone the sub is “required to add as an additional insured on this policy under a written contractor agreement.”
It’s still important for the GC to get the ACORD certificate to confirm that the required policies are actually issued and in place, and to periodically audit the subcontractor to confirm that no changes have been made. But it’s equally important for the GC’s attorney to let the GC know that the certificate is only part of the puzzle and that much more is needed. Frankly, this is often a hard sell; contractors tend to place great reliance on the certificate alone.
It’s also important for the GC’s attorney to read the contract forms themselves, which should specify the types of coverage, the minimum amounts of coverage, and whether the additional coverage is primary or secondary to the GC’s policy. The GC’s attorney also needs to look closely at the indemnification language and determine whether a waiver of subrogation endorsement is needed. Stay tuned for more on this topic in future articles.
About the Author
Rabih Hamawi is a past chairperson of the Insurance and Indemnity Law Section. He is a principal at the Law Office of Rabih Hamawi, P.C. and focuses on representing policyholders in fire, property damage, and insurance-coverage disputes with insurers and in errors-and-omissions cases against insurance agents.
Endnotes
The Association for Cooperative Operations Research and Development (ACORD) is a non-profit organization in the insurance industry. ACORD publishes and maintains an archive of standardized forms. ACORD has also developed a comprehensive library of electronic data standards with more than 1200 standardized transaction types to support exchange of insurance data between trading partners. ACORD itself, though, is not an insurance company and does not process claims or provide insurance coverage of any kind. https://en.wikipedia.org/wiki/ACORD
Chrysler Corp v Hardwick, 299 Mich 696, 700; 1 NW2d 43 (1941).
West American Ins Co v Meridian Mutual Ins Co, 230 Mich App 305, 311; 583 NW2d 548 (1998).
West American, 230 Mich App at 310.
If your insurance company has denied, delayed, or underpaid your insurance claim, contact Law Office of Rabih Hamawi for a case evaluation at (248) 905-1133 or www.hamawilaw.com.
Who is Rabih Hamawi?
Attorney & Counselor
Rabih Hamawi is a principal at the Law Office of Rabih Hamawi, P.C. and focuses his practice on representing policyholders in fire, property damage, and insurance-coverage disputes against insurance companies and in errors-and-omissions cases against insurance agents. He may be reached at (248) 905-1133.
