In Bender Square Partners v. Factory Mutual Insurance Company, Bender Square Partners sought to recover for losses it suffered as a result of Hurricane Ike to one of its properties it leased to PNS Stores, Inc. According to the Plaintiff, the amounts it sought to recover were covered under a Commercial Property Insurance Policy that Factory Mutual Insurance Company (“FM Global”) issued to Big Lots, Inc. and its subsidiaries, one of which is PNS Stores (the “Policy”). Plaintiff alleged that FM Global improperly refused to pay and indemnify Plaintiff for all losses covered under the policy. As a result, Bender sought damages and other relief for FM Global’s alleged breach of the policy.

After the parties conducted some discovery, FM Global filed a motion for summary judgment, arguing that all of Plaintiff’s claims failed as a matter of law. In response, Plaintiff admitted that it was not a named insured in the policy, but claimed, among other things, that it is a named holder of the certificate of insurance and was entitled to the benefits.

Judge Ellison, of the U.S. District Court for the Southern District of Texas, sided with FM Global, granting summary judgment for all of Bender Square’s claims. Regarding Plaintiff’s certificate of insurance argument, the Court concluded that the certificate of insurance did not give Plaintiff any rights under the policy. Proving fatal to Plaintiff’s allegations, the certificate of insurance contained the following language: “THIS CERTIFICATE IS ISSUED AS A MATTER OF INFORMATION ONLY AND CONFERS NO RIGHTS UPON THE CERTIFICATE HOLDER OTHER THAN THOSE PROVIDED IN THE POLICY. THIS CERTIFICATE DOES NOT AMEND, EXTEND OR ALTER THE COVERAGE AFFORDED BY POLICIES DESCRIBED HEREIN.”

Judge Ellison noted that “[i]t is well-established under Texas law that when a certificate of insurance contains language stating that the certificate does not amend, extend, or alter the terms of any insurance policy mentioned in the certificate, the terms of the certificate are subordinate to the terms of the insurance policy.” Judge Ellison continued, “[t]hus, the certificate of insurance will not suffice to create insurance coverage if such coverage is precluded by the terms of the policy.”

If you would like to avoid the result in Bender Square result, I recommend you require your lessees to acquire insurance for the rental property, listing you as either a named insured or an additional insured. Most certificates of insurance contain language similar to the language found in Bender Square’s certificate, so a certificate of insurance alone will probably not be enough to protect you.