I came across this new decision from the Ninth Circuit, on a Washington case (full disclosure: I learned of it courtesy of a national firm’s “Lexology” article), and it reminded me of a point that I continually try to hammer home with clients and transactional lawyers, who deal in these things daily: a “certificate of insurance” is barely worth the paper that it is printed on, and is never a substitute for a thorough review of the insurance policy itself.

In this case a hospital contracted with a nursing staffing service to provide skilled nurses.  As part of the deal the hospital required that the nursing staffing service demonstrate that it had adequate liability insurance.  The staffing service provided a certificate of insurance, which the underwriter prepared, showing that it had $5m of insurance.  Great.  What the certificate didn’t show was that there was a $1m self-insured retention (SIR), meaning that the staffing service was responsible for the first $1m of any loss.  A patient was injured and sued both the hospital and the staffing service; damages were slightly less than $1 million.  The hospital convinced the plaintiff to drop the claim against the hospital by showing plaintiff’s lawyer the certificate indicating plenty of coverage.  Plaintiff dropped the hospital, but when it got a judgment against the staffing service within the SIR, the service could not pay, and declared bankruptcy.  The plaintiff succeeded in getting its claim against the hospital revived.  Hospital sued the insurance company and the underwriter claiming that the certificate was deceptive.  Problem: the certificate (a standard form) has no blank for SIR or deductible, despite the fact that that is absolutely critical information.  The Ninth Circuit agreed with the trial judge that the hospital had no claim.

Lesson: if you do not have a long-standing business relationship, don’t just ask for the certificate of insurance when entering into any kind of contract where insurance matters (and there are few such contracts) – ask for the policy itself, with all declarations and endorsements, and have it reviewed by someone familiar with insurance policies and finding “holes” in coverage, like a large SIR.