Can a Certificate of Insurance Change the Terms of An Insurance Policy?

The answer to the above question on Certificates of Insurance¹ is found in another long-awaited answer to a certified question² that was tendered nearly a year ago from the Ninth Circuit Court of Appeals to the Washington Supreme Court in T-Mobile USA v. Selective Insurance Company of America. The question certified was:

Under Washington law, is an insurer bound by representations made by its authorized agent in a certificate of insurance with respect to a party’s status as an additional insured under a policy issued by the insurer, when the certificate includes language disclaiming its authority and ability to expand coverage?

Before addressing the Washington Supreme Court’s opinion,³ a few facts and the procedural history of this case are needed as a foundation in which to view this pure question of law.

• The first fact is that this case involves two “T-Mobiles” that are separate entities: T-Mobile Northeast LLC (“T-Mobile NE”) and T-Mobile USA. T-Mobile NE is a wholly-owned subsidiary of T-Mobile USA.
• The journey to litigation all started with T-Mobile NE when it hired a contractor to construct a cell tower on the rooftop of a building in New York City.
• The contract between these two entities, required the contractor to: (1) obtain a general liability insurance policy; (2) annually provide T-Mobile NE with a certificate of insurance; and (3) name T-Mobile NE as an additional insured under the policy.
• The contractor obtained a policy from Selective. The policy already had a provision that any third-party who entered into a contract with the contractor would automatically become an additional insured under the policy. That meant T-Mobil NE was automatically an additional insured under the contractor’s policy. T-Mobile USA was not a party to the contract, but the evidence showed that it knew about the contract and approved the contract as to form. Because T-Mobile was not a party to the contract, it was not an automatically an additionally insured under the policy.
• Over the next several years, the building of the cell tower progressed and Selective’s agent, as required under the terms of the contractor’s contract with the building owner, issued certificates of insurance (“COI”) annually. That is when the problems began.
• Selective’s agent issued the COIs to T-Mobile USA instead of to T-Mobile NE and wrote by hand on the COIs that: “T-Mobile USA, Inc. its Subsidiaries and Affiliates” [were] included as an additional insured [under the policy]” with respect to “certain areas of coverage.” The agent signed the note on the COIs as Selective’s “Authorized Representative.”⁴
• The New York building owner eventually sued the contractor and T-Mobile USA in federal court in New York for damages occurring during construction of the cell tower on his rooftop.
• Selective rejected the tender of a claim from T-Mobile USA. The owner soon amended the complaint to name the correct additional insured under the policy—T-Mobile NE.
• Nevertheless, T-Mobile USA had incurred expenses defending itself in New York because Selective had failed to recognize it as an additional insured; therefore, T-Mobile USA filed sued in Washington State, its headquarters, against Selective, headquartered in New Jersey, for declaratory judgment, breach of contract and common law insurance bad faith, among other causes of action. Because of the diversity of the parties, the suit was removed to a federal district court in Washington.
• T-Mobile USA’s claims were all dismissed after Selective moved for summary judgment arguing that the COI could not confer coverage on T-Mobile USA. T-Mobile USA appealed to the Ninth Circuit.
• The Ninth Circuit found that: (1) Selective’s agent acted with apparent authority in his notations on the COIs which bound Selective; (2) the representations of Selective’s agent on the COIs turned out to be inconsistent with the policy terms; and (3) the agent’s representations were inconsistent with other language in the COIs disclaiming the certificate’s authority to amend, extend, or alter the coverage afforded by the policy.⁵
• Finding a conflict in Washington state laws between the language in the COI and the policy—(1) that a COI does not trump policy language; and (2) the rule that the insurance company is bound by the representation of its authorized agent—the Ninth Circuit certified the question quoted above to the Supreme Court of Washington.

The flurry of briefs that followed the certification set forth the parties’ positions. T-Mobile USA contended that Selective was bound by its authorized agent’s representations on the COIs which stated that T-Mobile USA was an additional insured and T-Mobile USA had relied on such representations.

Selective took the position that T-Mobile USA’s reliance on the representations was unreasonable because T-Mobile USA knew it was not a party to the contract with the contractor and thus, not an additional insured under the policy, and furthermore, was, after all, a sophisticated business entity which was used to dealing with insurance companies.

The Washington Supreme Court went with T-Mobile USA, finding that the COI’s preprinted disclaimers were general boilerplate language whereas the agent’s hand-written statements were specific and under Washington law in interpreting contracts, the specific prevails over the general. The court explained that if the specific was not given preference over the general in COIs, then CIOs would be rendered pointless. In reaching that conclusion, the court distinguished a previous holding, on different facts, where it had ruled that the purpose of certificates of insurance is to inform the recipient that insurance exists, however, “it is not the equivalent of an insurance policy.”⁶ Thus, the court found that T-Mobile USA was an additional insured because under the general rule, Selective was bound by the representations of its agent that were made to T-Mobile USA when the agent issued the annual certificates of insurance. The court concluded as follows:

We answer the Ninth Circuit’s certified question this way: an insurance company’s agent who makes an authoritative representation binds the insurance company, even when that specific representation is transmitted via a certificate of insurance and accompanied by general disclaimers.⁷

There was one dissenting judge. Citing authority, he explained his “no” answer to the certificated question as follows: (1) T-Mobile USA was not covered as an additional insured under the policy from Selective; (2) certificates of insurance cannot supplant a policy that does not award coverage; (3) certificates of insurance are only informational documents and they do not confer insurance coverage which is found only in the policy itself; (4) certificates of insurance do not create a contractual relationship between the insurer and an additional insured; (5) the certificate of insurance contained disclaimer language conferring “no rights upon the certificate holder” or “amending, extending, or altering the [policy’s] coverage.”

The dissenting judge summed up his dissent as follows:

In other words, because the insurance policy did not recognize T-Mobile USA as an additional insured, the certificates of insurance have no effect on T-Mobile USA’s coverage. . . . Accordingly, I disagree with the majority that T-Mobile USA’s certificates of insurance take precedence over an insurance policy that simply does not cover T-Mobile USA.⁸

The dissent concluded:

Here, T-Mobile USA seeks something it was never entitled to—insurance coverage. As a sophisticated business entity, T-Mobile USA cannot be said to have reasonably relied on certificates of insurance proclaiming coverage it did not contract for or purchase. Awarding coverage to T-Mobile now would be a windfall for the company and a misuse of the tool of certificates of insurance.⁹

Wrap Up: The majority having sided with T-Mobile USA by finding that it was an additional insured under the policy as a result of its authorized agent’s notations on certificates of insurance documents, has effectively found a way in Washington State to actually change an insurance policy’s terms of coverage. In reaching this result, the supreme court found that the Washington state rule that an insurance company is bound by an authorized agent’s representations, is a superior rule to the rule that certificates of insurance cannot affect insurance coverage. It will be interesting to see if any other states follow the holding in T-Mobile.

Previous blogs have addressed this case and are excellent sources to view its long history.
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¹ A “Certificate of Insurance” is a summary type document usually issued by an agent on behalf of an insurer that verifies that a policy of insurance has been issued to an insured for a general type of risk. The Certificate of Insurance is usually issued to a third party who wants some evidence or assurance that a policy has been issued. See Postlewait Constr., Inc. v. Great Am. Ins. Co., 106 Wash 2d 96, 720 P.2d 805, 807 (1986).
² A “certified question” occurs when a federal court is called upon to determine a matter of state law. See Jonahan Remy Nash, Examining the Power of Federal Courts to Certify Questions of State Law, Cornell Law Review, Vol. 88, 1673 (2003).
³ T-Mobile USA v. Selective Ins. Co. of America, No. 96500, 2019 WL 5076647 (Wash. Oct. 10, 2019).
⁴ Id. at *2.
⁵ Id.
⁶ Id. at *5,6 citing Postlewait Constr., Inc. v. Great Am. Ins. Co., 106 Wash. 2d 96, 100-01 & n. 7, 720 P2d 805 (1986).
⁷ Selective 2019 WL 5076647, *7 (emphasis added).
⁸ Id. at *8
⁹ Id.