Certificates of Insurance: Only the Beginning of the Coverage Story

Understanding InsuranceCertificates of Insurance: Only the Beginning of the Coverage Story

By Alexcis Nell from The Fuentes Firm published on November 11, 2016.

There is a great deal of misunderstanding among freight brokers, freight forwarders, and the transportation industry generally regarding the weight Certificates of Insurance carry. Many brokers consider Certificates of Insurance binding proof of a motor carrier’s insurance coverage. For several reasons, Certificates of Insurance cannot be relied upon to paint the full picture of a motor carrier’s coverage. Certificates of Insurance are simply evidence of insurance, but not conclusive proof of insurance.[1]

A Certificate of Insurance may inaccurately represent a motor carrier’s coverage. An insurance policy reflected on a Certificate of Insurance may have been cancelled or altered. Additionally, the agent preparing the Certificate of Insurance may have inadvertently misrepresented coverage afforded under the policy.

A Certificate of Insurance does not amend, extend, or alter the coverage afforded by the referenced insurance policy.[2]  If the two documents conflict, the insurance policy itself controls in determining the amount and availability of coverage. A Certificate of Insurance can even state that the broker is an additional insured, but the actual insurance policy does not provide for such additional insured status unless additional requirements are met.

In a perfect world, the broker would obtain the motor carrier’s complete insurance policy, review it to ensure that sufficient coverage is available, and request an endorsement to the policy stating that the broker will receive notice if the policy is cancelled or amended. However, this is a time consuming and burdensome process that is often unrealistic for brokers working with many different motor carriers.

There are several ways brokers can protect themselves when determining whether a motor carrier has sufficient insurance coverage. First and foremost, brokers should hire responsible and trustworthy motor carriers. Reputable motor carriers are more likely to carry and maintain coverage required by law and the terms of the Broker-Carrier Agreement.

Broker’s agreements with motor carriers should require that the broker is named additional insured under the carrier’s policies, particularly on Auto Liability insurance. Brokers should ensure that the Certificate of Insurance reflects this additional insured status. Additionally, the Certificate of Insurance for the motor carrier’s cargo policy should name the broker as loss payee.

If the Certificate of Insurance does not contain these terms or others required under the Broker-Carrier Agreement, the broker should request an endorsement. It is possible to request an endorsement without receiving and reviewing the entire policy.

Contingent Cargo Coverage can protect a broker in the event that cargo is lost or damaged in transit and the carrier’s coverage is inadequate due to cancellation, exclusions (e.g. unattended vehicle or commodity limitation), or insufficient limits. However, these policies may require the broker to obtain evidence that the carrier has active insurance with limits at or beyond the carrier’s liability under the bill of lading. To ensure compliance with this provision, brokers must review the Certificate of Insurance in advance and maintain a copy of the Certificate of Insurance. Upon initial review of the Certificate of Insurance, the broker should calendar the date the policy is set to expire and request a renewed policy at that time.

In addition to ensuring that Certificates of Insurance are accurate, brokers can also verify that the underlying policies comply with the terms of the Broker-Carrier Agreement. While this can be a time consuming process, it is important for any broker that wants to avoid unexpected liability down the line. With some advanced planning, brokers can protect themselves from misleading Certificates of Insurance and deficient insurance policies.


[1] See Tex. Ins. Code Ann. § 1811.152 (West).

[2] Tex. Ins. Code Ann. § 1811.152 (West).