If a claim handler neglects to examine all aspects of the additional insured coverage, your costs will increase. However, with proactive handling, a crisis could be averted. Take, for example, the case of XYZ Crane.

XYZ Crane was working on a large construction project at a university when its crane tipped over, injuring another subcontractor. XYZ Crane's broker had issued a certificate of insurance as part of a policy renewal for the general contractor ABC. The certificate stated that ABC was an additional insured under the policy as required by signed executed contract. A tender letter was received by XYZ's insurance carrier, claiming that ABC was owed a defense under XYZ's policy, and that XYZ needed to pay for ABC's legal fees.

An inexperienced claim handler, assuming that certificates do not create any coverage, may not respond to the tender, and may not even investigate the impact of a signed contract. On the other hand, an experienced claims adjuster will get an attorney involved who understands the state case law and statutory laws on additional insured issues. An increasing number of state courts have interpreted certificates of insurance to imply coverage.

If this is not examined, XYZ may be paying expensive legal fees after the fact. However, with the help of counsel, who is alerted to the fact that the contract between ABC and XYZ is unsigned at the time of the accident and who researched the state law regarding coverage implications of certificates, it is determined that this certificate does not create coverage for ABC under XYZ's policy, and an adequate denial letter to the carrier of ABC is made.

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