Certificate Of Insurance

Business people in Grand Prairie, Fort Worth, Arlington, Saginaw, Roanoke, Grapevine, Hurst, Euless, Bedford, and other cities in the Dallas / Fort Worth metroplex area should pay attention to this recent case.
The United States District Court, Southern District, Houston Division, issued an opinion on January 24, 2012, in a case styled, Bender Square Partners v. Factory Mutual Insurance Company, d/b/a FM Global, and PNS Stores, Inc.
This case deals with the rights conferred by a Certificate of Insurance, or more accurately the rights that are not conferred.
Factory Mutual Insurance Company, d/b/a FM Global filed a motion of summary judgment which was granted by the court. Here are the relevant facts and basis for the ruling the court made in this case.
Bender Square Partners (Bender) sought to recover for losses it suffered as a result of Hurricane Ike in 2008 to property (“the Property”) it had leased to PNS Stores, Inc. (PNS). According to Bender, the amounts it sought to recover are covered under a Commercial Property Insurance Policy that FM Global issued to Big Lots, Inc. and its subsidiaries, one of which was PNS. Bender alleged that FM Global wrongfully refused to timely and fully pay and indemnify Bender for all losses covered under the Policy. As a result, Bender sought damages and other relief for FM Global’s alleged breach of the Policy.
FM Global filed the motion, arguing that Bender’s claims failed as a matter of law. Specifically, FM Global asserted that Bender was not an insured or an additional insured under the Policy and thus had no contractual basis to bring a claim for coverage. FM Global also averred Bender was not entitled to proceeds from the Policy as a holder of the Policy’s certificate of insurance (“the Certificate”), as the Certificate did not confer rights under Texas law.
In it’s analysis of the case the Court noted that PNS obtained the Policy from GM Global in order to comply with lease provisions.
The Policy did not identify Bender as an insured or as an additional insured.
Bender admitted it was not an additional named insured under the Policy. Furthermore, Bender was not named as an additional insured in the Certificate. Bender also admitted that it was not an additional insured or loss payee on the Policy. Bender did claim, however, that it is a named holder of the Certificate, and is an intended or implied third-party beneficiary of the Policy.
In discussing being a “Holder of a Certificate of Insurance” the Court said that although Bender is the named holder of the Certificate, the status did not confer any rights to Bender under the Policy. The Certificate explicitly states:
THIS CERTIFICATE IS ISSUED AS A MATTER OF INFORMATION ONLY AND CONFERS NO RIGHTS UPON THE CERTIFICATE HOLDER OTHER THAN THOSE PROVIDED IN THE POLICY. THIS CERTIFICATE DOES NOT AMEND, EXTEND OR ALTER THE COVERAGE AFFORDED BY THE POLICIES DESCRIBED HEREIN.
The Court cited Texas law saying “It is well-established under Texas law that when a certificate of insurance contains language stating that the certificate does not amend, extend, or alter the terms of any insurance policy mentioned in the certificate, the terms of the certificate are subordinate to the terms of the insurance policy.” Thus, “the certificate of insurance will not suffice to create insurance coverage if such coverage is precluded by the terms of the policy.” Texas law clearly provides that the certificate of insurance does not supersede the plain language of the insurance policy. “Here, the certificate of insurance itself did not manifest the insurance coverage afforded … as an insured. Rather, the certificate merely evidenced Bender’s status as an insured and, by its very language, specified that the insurance coverage was that provided by, but subject to the terms, exclusions and conditions of, the named insurance policy. Thus, Bender’s insurance coverage is that provided by the insurance policy itself.” Therefore, the Certificate does not confer any rights to Bender under the Policy.
The case went on to discuss why Bender did not qualify as a third-party beneficiary.
This case serves as a “buyer be aware” warning to purchasers of insurance products. A reminder to discuss and make sure that the coverage you are looking for is the coverage you get and that relying solely on the Certificate of Insurance is not good enough.