Certificate Can’t Create Coverage Not In Policy

Agent Must Avoid Issuing Certificate the is not Accurate

Insurance contracts are to be interpreted in consideration of the language in the policy. Outside documents that are not part of the policy and a policy may not, under normal circumstances, be modified by estoppel.

In Quincy Mut. Fire Ins. Co. v. Imperium Ins. Co., — Fed.Appx. —-  United States Court of Appeals, 2016 WL 767177, Third Circuit (Feb. 29, 2016) the Third Circuit Court of Appeal was faced with an attempt to change the meaning of an insurance policy contrary to the clear and unambiguous language of the policy.

Quincy Mutual Fire Insurance Company sought a declaratory judgment that Imperium Insurance Company was obliged to reimburse Quincy Mutual more than $1 million for its defense and indemnification of one its insureds, Sunrise Concrete, Inc. Quincy Mutual asserted that Imperium had primary liability coverage over the claims against Sunrise Concrete. The district court entered summary judgment in Imperium’s favor.


Sunrise Concrete was the concrete contractor for a housing development construction project in Pottstown, Pennsylvania. Sunrise Concrete subcontracted some of the concrete work, including the construction of porches, to Cruzeiro Novo under an oral agreement. A construction worker, Zhe Feng Huang, was injured while working on a porch roof. Huang sued Sunrise Concrete and others for negligence in Pennsylvania state court.

Sunrise Concrete’s general liability insurance carrier was Quincy Mutual, who defended Sunrise Concrete against the suit. Quincy Mutual added Cruzeiro Novo’s insurer, Imperium, as a defendant in the state-court litigation. Quincy Mutual asserted that Sunrise Concrete was an additional insured on Cruzeiro Novo’s policy and that Imperium was therefore obligated to defend Sunrise Concrete.

Before Sunrise Concrete permitted Cruzeiro Novo to perform work as its subcontractor, it sought assurance from Cruzeiro Novo that it was an additional insured on Cruzeiro Novo’s policy. Cruzeiro Novo produced a certificate of liability insurance that stated, “Sunrise Concrete Company Inc. is named as additional insured.” The certificate, however, bore this warning: “This certificate is issued as a matter of informatio [sic] only and confers no rights upon the certificate holder. This certificate does not amend, extend or alter the coverage afforded by the policies below.”  (emphasis added) The certificate of insurance was issued by Fairways Insurance Services, an agent of Imperium.

At the time of Huang’s injury, Cruzeiro Novo’s insurance policy with Imperium contained a blanket additional insured endorsement. Because Cruzeiro Novo worked as Sunrise Concrete’s subcontractor under an oral agreement and not a written contract as required by the blanket additional insured endorsement, Imperium asserted that Sunrise Concrete was not an insured under the additional insured endorsement.

Quincy Mutual settled Huang’s suit against Sunrise Concrete for $1 million but reserved its rights against Imperium and filed this declaratory judgment action in the United States District Court for the Eastern District of Pennsylvania. Quincy Mutual and Imperium filed cross motions for summary judgment. The district court granted Imperium’s motion and denied Quincy Mutual’s motion.

Quincy Mutual argues the district court erred by granting Imperium summary judgment for three reasons.


Under Pennsylvania law, courts interpret the meaning of insurance contracts by determining the intent of the parties as expressed by the policy language.  If the language is unambiguous, the express terms of the contract are controlling. An ambiguous policy term is construed against the insurer. A contractual provision is ambiguous if it can reasonably be understood to have more than one meaning. But a court may not strain or distort the language to find an ambiguity where none exists.

Quincy Mutual argues that the term “written contract or agreement” is ambiguous because it could mean “written contract or (any written or oral) agreement” or “written contract or (written) agreement.” The first construction is conceivable, but the only reasonable interpretation is the second. In this phrase, “written” modifies both “contract” and “agreement.” To read it otherwise would render “written” meaningless.

The parties agree that there was no written contract or agreement between Sunrise Concrete and Cruzeiro Novo. Under the express terms of the endorsement, Sunrise Concrete was not an additional insured and Imperium was not obligated to defend and indemnify it.

Quincy Mutual argued that Imperium is bound by the certificate of insurance issued by Fairways, Imperium’s authorized agent. The certificate of insurance stated that Sunrise Concrete was an additional insured on Cruzeiro Novo’s policy with Imperium. Under Pennsylvania law, “an insurer is liable for the acts of an agent who had authority to bind coverage and had advised the policyholder that he had done so.”

Fairways did not have authority to add Sunrise Concrete as an additional insured through a certificate of insurance. The certificate of insurance specifically stated that it was for informational purposes only and did not modify the terms, exclusions, or conditions of the policy. The statement in the certificate of insurance that Sunrise Concrete was an additional insured was without effect.

Finally, Quincy Mutual argues that, even if Sunrise Concrete was not an additional insured under the policy endorsement or certificate of insurance, Imperium is estopped from denying coverage due to the statement in the certificate of insurance.

Under both Pennsylvania and New Jersey law, to establish coverage by estoppel, the insured must have reasonably and detrimentally relied on a misstatement by the insurer that coverage existed. The Third Circuit concluded that the district court correctly determined that no reasonable jury could find that Sunrise Concrete reasonably relied on the certificate of insurance because it is unreasonable to rely on a certificate of insurance that explicitly disclaims conferring any rights.


Insurance agents, with regularity, issue certificates of insurance upon which people rely. That reliance is misplaced because of the language in the certificate that “this certificate does not amend, extend or alter the coverage afforded by the policies below.” In essences, as the court found, the certificate should not be relied on because it explicitly disclaims the fact that it confers any right on any person.

ZALMA-INS-CONSULT                      © 2016 – Barry Zalma

Barry Zalma, Esq., CFE, practiced law in California for more than 43 years as an insurance coverage and claims handling lawyer.  He now limits his practice to service as an insurance consultant and expert witness specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes.

He founded Zalma Insurance Consultants in 2001 and serves as its only consultant.

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About Barry Zalma

An insurance coverage and claims handling author, consultant and expert witness with more than 48 years of practical and court room experience.
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