There are two things that I can say about the Washington Supreme Court’s decision in T-Mobile USA Inc. v. Selective Insurance Company, No. 96500-5 (Wash. Oct. 10, 2019), which addresses the availability of coverage for a putative additional insured. First, I believe that the case was wrongly decided. But the case itself is too fact specific to warrant discussion here.
Second, the decision, if followed by other states, has the potential to cause a significant increase in the extent of litigation over the availability of coverage for putative additional insureds. In addition, it could require insurers to significantly alter the manner in which they deal with agents and brokers and cause litigation between them. These are the reasons why T-Mobile was selected as one of the year’s ten most significant coverage cases.
At issue in the case was the availability of additional insured coverage, for T-Mobile USA Inc., under a policy issued by Selective Insurance. The underlying case had to do with the construction of a cell phone tower, by the named insured, on a rooftop in New York City. The details of this are not important for purposes here.
T-Mobile USA Inc. did not have a contract with the named insured. Thus, it did not qualify as an additional insured on the basis of the blanket additional insured endorsement contained in the Selective policy, i.e., it was not a party that the named insured agreed, by contract, to add as an additional insured.
However, T-Mobile USA Inc. argued that it was an additional insured on the basis of a Certificate of Insurance that named it as such. The Certificate of Insurance was signed by the agent as Selective’s “Authorized Representative.”
Putting aside how the coverage litigation got there, the Ninth Circuit held that T-Mobile USA Inc. was an additional insured on the basis that the agent acted with apparent authority in issuing the COI. However, as you would expect, and as well all know, the COI had all manner of disclaimers specifically saying that it does not confer additional insured coverage on any party. Selective argued that, for these reasons, T-Mobile USA Inc. was not an additional insured. The Ninth Circuit certified the dispute to the Washington Supreme Court.
The Washington Supreme Court set out the various disclaimers that appeared on the COI: “It stated in bold capital letters that the certificate ‘is issued as a matter of information only and confers no rights upon the certificate holder,’ ‘does not affirmatively or negatively amend, extend or alter the coverage afforded by the’ insurance policy, and ‘does not constitute a contract between the issuing insurer(s), authorized representative or producer, and the certificate holder.’ It also stated in bold, ‘If the certificate holder is an ADDITIONAL INSURED, the policy(ies) must be endorsed. … A statement on this certificate does not confer rights to the certificate holder in lieu of such endorsement(s).’”
It is hard to imagine clearer or more conspicuous language about a party’s rights – lack thereof, actually – as an additional insured. However, the court concluded that “the preprinted disclaimers are general in nature. They purport to disclaim virtually every bit of information provided by the certificate. By contrast, the additional insured statement that the agent wrote in specifically refers to certain areas of policy coverage and makes a discrete representation that ‘T‑Mobile USA Inc., its Subsidiaries[,] and Affiliates’ ‘is included as an additional insured.’ This specific written-in additional insured statement thus prevails over the preprinted general disclaimers.’”
A dissenting opinion saw it differently and would have followed what it characterized as the majority rule – certificates of insurance do not confer coverage -- which is found in the policy -- they do not create a contractual relationship between the insurer and the additional insured, they are tools of the trade, for informational purposes only and contain all manner of disclaimers stating that they confer no rights upon the certificate holder.
If followed, T-Mobile has the potential to cause a significant increase in the extent of litigation over the availability of coverage for putative additional insureds. Despite the fact that certificates of insurance state six ways from Sunday that they confer no additional insured rights upon the certificate holder, agents and brokers routinely issue them with statements that the certificate holder is an additional insured.
If, as the T-Mobile court stated, specific written-in additional insured statements prevail over the preprinted general disclaimers, the stage is set for litigation between insurers and certificate holders over their rights as additional insureds. Even if the agent or broker has no authority to state that the certificate holder is an additional insured, the certificate holder likely does not know that, and, in fact, likely believes the opposite, especially if they are an unsophisticated insured. This is often the case with general contractors and subcontractors who so frequently use COIs. Thus, the certificate holder will argue that the broker or agent acted with apparent authority in issuing the COI.
This can be expected to lead to litigation between insurers and certificate holders over their rights as additional insureds. Such litigation will likely get into the relationship between the insurer and agent or broker. Insurers will likely take action against brokers and agents that stated, without authority, that a certificate holder is an additional insured. Insurers will need to take steps – how, remains to be seen – to stop brokers and agents from issuing COIs stating that the certificate holder is an additional insured. Insurers will also need to take steps – how, remains to be seen – to stop certificate holders from believing that the agent or broker has authority to name them as an additional insured. Maybe the solution is to get rid of that narrow rectangular box on the bottom of the COI where agents and brokers are fond of writing in that the certificate holder is an additional insured.
