In the world of property-casualty insurance, businesses and their advisers often deal with certificates of insurance. They are commonplace instruments that are accepted in the marketplace as reasonable assurance that certain objects or activities are covered by insurance. For example, when valuable equipment is stored in a warehouse until a construction project is ready to receive and install it, cautious owners often insist on seeing insurance certificates before paying for the merchandise in order to be assured that the property is protected against casualty losses.
When a contractor employs a subcontractor to perform part of the work of a construction project, it is common for the contractor to insist on seeing an insurance certificate that indicates that the subcontractor is carrying the right kind of insurance, with adequate limits of liability, and that the required parties (usually, the contractor and owner) are named as “Additional Insureds.” The general contractor is often required to ensure that the subcontractors have insurance and file certificates.