Blinders in Reviewing a COI Can Lead to a Binder on the Part of the Insurer

Written by: Beth Kanik, Esq.

Merriam Webster  defines a “binder” as a person or a machine that holds something together. In 2019, the Washington Supreme Court in an en banc opinion expanded that definition to apply to a certificate of insurance (“COI”) In so doing,  the certificate holder was qualified as an additional insured when language in the actual policy never said as such and language in the actual COI disclaimed any such intent.  This opinion is noteworthy because it is largely devoid of support from other courts, including those within its own (Ninth) Circuit. Although it can be argued that this opinion is no more than an outlier, potential exists for an insurer to be bound by what is stated in a COI, policy language to the contrary.  An insurer who acts with “blinders” on in reviewing its own COI may well find itself bound.

In T-Mobile USA Inc. v. Selective Insurance Co., 96500-5 (October 10, 2019), a COI was found controlling over an insurance policy that did not, by its explicit terms, cover T-Mobile USA.  The Court’s opinion relied on the representation made by an insurance agent to T-Mobile USA that the COI provided coverage although the language on the COI clearly stated that it did not confer any rights or amend, extend or alter the terms of the Policy.  The Court  ignored the sophistication of T-Mobile USA in focusing on what it characterized as “reasonable reliance” by T-Mobile USA .

The sole question before the Supreme Court in Washington was, “ Under Washington law, is an insurer bound by representations made by its authorized agent in a COI with respect to a party’s status as an additional insured under a policy issued by the insurer, when the COI includes language disclaiming its authority and ability to expand coverage?”

The Court said yes, because: a) T-Mobile USA showed that it had an objectively reasonable belief that the agent who had the authority to issue the COI necessarily made its reliance on the COI reasonable; b) the COI was a preprinted disclaimer which was ineffective whereas the additional insured statement had been specifically written into the COI; c)  an agent’s authorized or apparently authorized representation takes precedence; and d) public policy confirms the enforcement of the Agent’s representations because it acts as incentive for the Principal (Selective)to  ensure that the Agent’s representations are true.

The dissent identified the COI as an informational document only which cannot supplant a policy that not award coverage.  “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.” In response to the reliance argument on the declaration by the agent, the dissent referred to the disclaimers on the COI as well as T-Mobile USA’s extensive experience as contrary to the “reasonableness” of their actions.