Often when you are asked to provide a customer or a general contractor or other third parties with a certificate of insurance, they’ll require that waiver of subrogation is included in your policies.
What is a waiver of subrogation? Why is someone asking for it? How do you get it?
I’ll explain these questions, coming right up.
Let’s start with answering the question,
What is Subrogation?
Subrogation is a right of your insurance company after they’ve paid a claim, to recoup their loss from the at-fault party or their insurance company.
What is the Waiver of Subrogation or subro?
Waiver of subro is an endorsement to a policy that prevents your insurer from asserting a claim against the at-fault or negligent party after your insurer has paid a claim.
You are waiving your insurance company’s right to subrogate against another party. Most commonly it’s the party you are entering into a contract or agreement with.
Transfer of Recovery Against Others to Us is another phrase used in some policies that are similar to Waiver of Subrogation Rights.
Why is a Waiver of Subrogation Needed?
Waiver of subrogation is part of the contractual risk transfer process to cleanly separate and allocate liability and minimize lawsuits between parties in a contract.
For example, a general contractor will require a waiver of subro, additional insured status, and primary and non-contributory status from their sub-contractors to assure that if a liability, auto, or workers’ compensation claim arises on the job site, it is covered directly by the subcontractor’s policies without the chance of it coming back on the GC in the form of subrogation.
That’s a bit over-simplified since there are always issues regarding negligence, but that is the essence of why a waiver of subro is required.
On General Liability policies, waiver of subrogation can be blanket or scheduled.
A scheduled Waiver means that an endorsement is issued specifying what entities are provided this waiver.
Blanket Waiver means that all entities that require a waiver of subro by contract are automatically granted this status by this endorsement.
The Value of Waiver of Subrogation
Waiver of subro helps minimize lawsuits between the parties to a contract.
The risk, once assigned to the insurers by the parties is determined to stop there, without allowing the insurer to seek reimbursement of costs from a third party.
It guarantees that the loss is paid without unnecessary litigation or arbitration to determine fault, which often leads to long and costly delays.
An important consideration
It’s nearly impossible to enter into a contract without providing a waiver of subrogation, but it’s important to understand something.
If your insurer pays a claim that wasn’t entirely your fault, waiver of subro stops any potential recovery from the other party that may be responsible in whole or in part for causing that claim.
This means your loss experience will take a beating and you could end up paying more for your insurance in the future.
By contract, you are assuming liability without a right of recovery.
There’s not much you can do about it, but it’s important to understand this contractual element.
This highlights the need for deploying a safety and safety culture.
Avoiding claims in the first place is critically important to safeguarding your employees and others as well as protecting property.
Fewer claims mean lower costs for insurance and fewer hassles down the road.
Need help in establishing your safety program, or understanding your insurance?
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