There are two types of certificates of insurance.  Those that serve only as ‘evidence’ that coverage is existent and those that perform a technical risk management function by shifting risk.

A certificate of insurance that merely publishes the policyholder’s name, address and insurance detailing such as insurance company, policy number, expiry date and coverage limit provides the certificate holder with information only.  Beyond confirmation that coverage exists, the document itself does not perform a function.

Legally sophisticated parties (i.e. municipalities, property managers, national associations, etc.) often have risk management professionals (in-house or otherwise) whose expertise is to work to develop procedures that reduce threat.  By appreciating rules in Canadian law that can impose liability vicariously upon them as a result of the actions or activities of other for which they are engaged to in some manner, these organizations realized that they should protect themselves accordingly.  To view a sample certificate, click here.

This legal principle of vicarious liability is what makes a mall management corporation ultimately responsible should a tenant in their building cause injury to a third party such as a visiting shopper.  The same applies to other relationships such as property owners and the contractors who perform work for them.  If the contractor causes an injury on the job site to a passerby, the property owner is ultimately responsible because the contractor was working on their behalf. 

To reduce the potential monetary costs (doesn’t affect legal responsibility) those in a position of possible vicarious liability will contract with the organization that has placed them into this legal position in such a manner as to impose financial responsibility back upon them.  Of course, imposing financial responsibility is of little benefit if it can’t be afforded.  As non-profit organizations, most are in a position of not being able to ‘dig into their corporate pockets’ for millions of dollars.  As such, entities who could be vicariously liable, require the proof of insurance declared in a certificate of insurance with the added security of being listed as ‘additional insured’. 

It is the listing as ‘additional insured’ that gives significant functionality to an insurance certificate.  Usually the additional insured will be the certificate holder (party to whom it is issued).  By receiving a certificate, they are assured that insurance is in place and their inclusion as ‘additional insured’ places an obligation onto the insurance company to include them as a party to the insurance policy.  Of course, the insurance company will not be willing to include them in their full, overall scope, thus a ‘limiting statement’ will be shown.  Such limiting statement will be phrased as:

The insurance extended or otherwise afforded to the ‘additional insured’ shall be limited only to vicarious liability arising from operations of the named insured.

The wording of the limiter may vary from one insurer to another, however the purpose and interpretation remains the same.  Again, the ‘additional insured’ gains only protection against incidents that originate from claims involving the policyholder (named insured).