Waiver of subrogation: what it is and when you need one

When your insurer pays a claim, it usually gets the right to go after whoever caused the loss to get its money back. That right is called subrogation. A waiver of subrogation gives it up in advance for a named party, usually the GC, owner or landlord you’re working for, and you need one when your contract or lease requires it.

You get one by asking your agent to add a waiver endorsement to each policy the contract names, usually general liability, auto and workers’ comp. A checkbox on a certificate isn’t a waiver. The endorsement is.

What does subrogation look like on a real claim?

Say you’re an electrical sub on a commercial job. The GC’s crew drops a bundle of conduit from a lift, and it lands on your apprentice, who misses two months of work. Your workers’ comp insurer pays $85,000 in medical bills and lost wages. Because the GC’s crew caused the injury, your comp insurer can usually pursue the GC to recover that $85,000. That’s subrogation.

With a waiver of subrogation naming the GC on your workers’ comp policy, your insurer can’t bring that suit. It absorbs the $85,000 instead. That’s the point from the GC’s side: it doesn’t want to be sued by the insurers of the subs it hired.

The same idea runs through general liability and auto. If your liability insurer pays a claim the GC partly caused, a waiver keeps it from turning around and pursuing the GC for a share.

What is the purpose of a waiver of subrogation?

It keeps the people on a job, or in a building, from suing each other through their insurers. Each party’s insurance pays for the losses it was bought to cover, and nobody’s claim turns into a second lawsuit against a business partner. Contracts use waivers to put the risk where both sides agreed it would sit. Leases use them the same way. A landlord and a tenant often waive recovery against each other for property damage, so a fire started by the tenant’s coffee maker goes to the landlord’s property insurer, without that insurer then suing the tenant.

Most commercial property policies already allow a written waiver made before a loss. On liability, auto and comp, contracts want to see the waiver endorsement itself.

Do I need a waiver of subrogation?

You need one when a contract or lease requires it. Subcontracts, master service agreements, commercial leases, equipment rental agreements and property management contracts often do. Otherwise, there’s no need. A waiver gives up your insurer’s right to recover from that party, so it belongs where you’ve agreed to it in writing.

Timing matters. The waiver has to be in place before the loss. Agreeing to one after an accident, in a settlement or a new contract, can interfere with your insurer’s rights and create a coverage problem, so any waiver in a contract should be matched by the endorsement on your policy from the start.

If a contract asks for a waiver your policy can’t give, raise it before you sign rather than after the certificate is rejected. The line-by-line read of a subcontract’s requirements, waivers included, is in how to read the insurance section of a subcontract.

Blanket or scheduled?

A scheduled waiver names one party, like a specific GC for a specific project. Each new contract means another change. A blanket waiver applies to anyone you’ve agreed in a written contract to waive, which fits a contractor who signs new subcontracts every month.

Read the blanket wording, though. Some apply only when the written contract was signed before the loss, which is the normal rule anyway. Some apply only to the party you contracted with directly, which can leave out a project owner that your subcontract also names.

On each policy, the forms are different:

• On general liability, the standard endorsement is CG 24 04, and many carriers offer blanket versions or build the waiver into a contractor’s endorsement package.
• On workers’ comp, it’s WC 00 03 13, with a schedule that can name one party or apply to anyone you’ve agreed in a written contract to waive.
• On auto, it’s a separate endorsement.
• On an umbrella, the waiver often follows the policies underneath, but check the umbrella wording if the contract lists it.

Why do some carriers charge for a workers’ comp waiver?

The waiver costs the carrier recoveries. When someone else causes a comp injury, subrogation is how the carrier gets part of that claim back. Waive it, and those recoveries disappear, so many carriers add a charge for the comp waiver, and some states set how that charge is calculated.

What drives the charge:

• The class of work and its payroll, since riskier trades and bigger payrolls give up more potential recovery
• Whether the waiver is blanket or names one party, since a blanket waiver applies to every contract that requires it
• The state’s rules, where they set how the charge is figured
• The carrier’s minimum charge, if it has one

General liability waivers are often included in a contractor’s blanket endorsement package, and auto waivers vary by carrier. If most of your contracts require comp waivers, ask your agent whether a blanket waiver makes more sense than adding GCs one at a time.

How do I get a waiver of subrogation?

1. Send your agent the insurance section of the contract or lease that requires it.
2. Your agent checks which policies it applies to and whether your policies already carry a blanket waiver.
3. For any policy that doesn’t, your agent asks the carrier to add the endorsement, naming the party or using blanket wording.
4. Once it’s issued, your agent sends a certificate with the waiver box checked for those policies and attaches the endorsement copies.
5. Keep the endorsements on file, and check that they carry over at every renewal.

The request can be this short: “Please add a waiver of subrogation in favor of (GC’s legal name) and (owner’s legal name) on my general liability, auto and workers’ comp policies, as required by our written contract for (project name), using blanket wording if available, and send me the endorsements.”

If you’d like a second read on what a contract’s waiver clause is asking for, send it through our contract review. If a certificate came back because the waiver box was checked without an endorsement behind it, why your certificate of insurance got rejected covers the fix.