Washington High Court Finds that Certificates of Insurance Can Create Coverage

Answering a certified question from the Ninth Circuit, the Washington Supreme Court issued a surprising decision, holding that certificates of insurance can create coverage despite express disclaimers that they do not “amend, extend or alter the coverage afforded by” the policy.[1] This decision is inconsistent with precedent from courts across the country that routinely hold certificates of insurance are informational documents only that cannot supplant the terms of an insurance policy.

In this Washington case, T-Mobile USA, made a demand for additional insured coverage in connection with a suit filed by the owner of a New York City rooftop on which T-Mobile USA’s subsidiary, T-Mobile NE, had constructed a cell phone tower. T-Mobile NE had previously contracted with a service contractor to perform services in relation to the construction of the cell tower. T-Mobile NE’s contract required the contractor to name T-Mobile NE as an “additional insured” under its liability policy.

In turn, the contractor obtained an insurance policy that provided additional insured status to a third party if the contractor was required by contract to provide additional insured coverage to the third party. In conjunction with the issuance of the policy, the contractor also had a certificate of insurance issued, which stated that “T-Mobile USA Inc., its Subsidiaries and Affiliates” were “included as an additional insured” under the policy, and was signed by the insurance agent as the insurer’s “Authorized Representative.” The certificate was issued on an industry-standard form, which included disclaimers in bold capital letters that the certificate was provided for informational purposes only and could not “amend, extend or alter the coverage afforded by” the policy. The certificate specifically stated that it did not “confer rights to the certificate holder” as an additional insured absent proper endorsement of the policy itself.

When the owner of the rooftop sued the contractor and T-Mobile USA (not T-Mobile NE) for damages allegedly associated with the construction of the cell tower, T-Mobile USA and the contractor tendered the suit to the insurer for coverage. The insurer rejected T-Mobile USA’s tender on the ground that it did not qualify as an additional insured under the policy. Specifically, the insurer argued that T-Mobile USA was not entitled to coverage because it was T-Mobile NE, not T-Mobile USA, that had a contract with the contractor requiring additional insured coverage.

In the ensuing coverage litigation, the trial court granted summary judgment in favor of the insurer. However, on appeal, the Supreme Court of Washington held that the certificate of insurance, which stated that T-Mobile USA was an additional insured, created coverage for T-Mobile USA under the policy even though T-Mobile USA was not entitled to coverage under the terms of the policy itself. Rejecting the argument that the certificate could not create coverage, the court held that the “specific written-in additional insured statement thus prevails over the preprinted general disclaimers.”

Notably, the American Property and Casualty Insurance Association filed an amicus brief, arguing that allowing certificates of insurance to create coverage would conflict with public policy by putting an “end to the use of a tool that many stakeholders find useful when appropriately limited to its intended use as an ‘information-only’ communication that clearly explains that status.” The court rejected this argument, finding that its decision provides insurers with “incentive to ensure that the agent’s representations … are true” and that a contrary result would mean “an insurance company’s representations would be meaningless and it could mislead without consequence.”

The dissenting opinion noted the long-understood principle that certificates of insurance are “tools of the insurance trade” and generally considered in the insurance industry to be “informational documents only” that “do not confer insurance coverage.” Applying this principle, the dissent stated that awarding coverage to T-Mobile USA resulted in a windfall for T-Mobile USA and “a misuse of the tool of certificates of insurance.”

The T-Mobile case is an anomaly among an extended line of cases across the country consistently holding that certificates of insurance cannot create coverage in light of the express disclaimers on most certificates. We predict that policyholder counsel will try to seize upon the T-Mobile decision to argue for additional insured coverage even when the policy itself does not afford such coverage.

[1] T-Mobile USA Inc. v. Selective Ins. Co. of Am., No. 96500-5, 2019 WL 5076647 (Wash. Oct. 10, 2019).