Waivers of Subrogation Explained
Staffing Workers' Compensation Policies
Wavering on a Waiver of Subrogation? Don’t worry. You’re not alone. This is a common contract requirement we see in just about every contract review. However, many people still don’t understand what it is or what it actually does for the parties involved.
To simply explain, a Waiver of Subrogation is an agreement between two parties in which one party agrees to waive subrogation rights against another in the event of a loss. Waivers of Subrogation aren’t coverage-specific. It can be provided under commercial general liability, automobile, workers’ compensation (WC) and even property coverage.
Relative to the temporary staffing industry, we commonly see this request under the WC policy. As it relates to WC, coverage is often included as a “Waiver of our Right to Recover from Others” endorsement. For the purpose of this blog post, I’ll be focusing specifically on WC coverage and how this endorsement applies and responds to a particular claim.
Scheduled and Blanket Waivers of Subrogation
There are two different versions of a waiver endorsement that an insurance carrier can offer a policy to provide this coverage. They are as follows:
- Scheduled Waiver of Subrogation
- Blanket Waiver of Subrogation
Let’s start with scheduled endorsements. What this means is for each contract or request requiring a Waiver of Subrogation, the carrier must pre-approve and specifically endorse the policy scheduling the person or organization on the Waiver of Subrogation endorsement.
Blanket Waiver of Subrogation endorsements works a little differently. Through prearranged wording, the carrier can include a Waiver of Subrogation endorsement that affords automatic “blanket” coverage to any person or organization where the applicable wording applies. Example wording of a blanket endorsement is as follows: “Any person or organization for whom you are required, by written contract or agreement to obtain this waiver from us.” It’s important to note for this blanket endorsement to be triggered, the person or organization must have a written contract or agreement between the insured for coverage to apply. Blanket endorsements are often preferred to avoid the required approval process.
To understand further, let’s review the following example:
XYZ Staffing Company has been contracted with Made-Up Manufacturing to provide temporary workers for their production line. Included in the contract/agreement between both parties, Made-Up Manufacturing requires that XYZ “Waive their Rights of Subrogation” related to any Workers’ Compensation injuries. Week one into the assignment, XYZ’s temporary employee working at Made-Up Manufacturing slips and falls on some oil leaking from one of the machines. XYZ files a WC claim where benefits are paid to the injured employee. It was determined, however, that poor machine maintenance by Made-Up Manufacturing contributed to the worker’s injury. The insurer of XYZ would typically subrogate against Made-Up Manufacturing for their poor maintenance practices. However, XYZ has a contract with Made-Up waiving their subrogation rights. Because of this agreement and waiver, the insurer can no longer subrogate or obtain reimbursement for the WC benefits paid to XYZ employee.
It’s important to be aware that the Waiver of Subrogation in this situation is valid only between XYZ and Made-Up Manufacturing. A subrogation waiver doesn’t prevent an injured worker from suing the third party. In this example, Made-Up Manufacturing could still be sued directly by the XYZ injured employee for failure to maintain a safe workplace and negligence that led to the injury.
In some states, however, it isn’t permitted to waive your rights to subrogation under WC coverage. It’s important to work closely with your broker to ensure your policies include the appropriate endorsement to comply with your contract requirements as well as your specific state rulings.
For more information, contact an ‘A’ Team member today.
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