A workers comp question asked today…
Waivers of subrogation, subrogation and their effects are seldom understood. When it comes to insurance transactions an insurance company is allowed to subrogate against or pursue it’s rights to re-coup damages it has paid against a third party for damages which the third party may have caused. You see in an insurance policy the insured or client of the insurance company gives over to the insurance company it’s right to recover from another party damages it may have had to pay in response to coverage provided in a policy. That’s called subrogation. Under a waiver of subrogation the insured or client agrees to waive the rights of the insurance company to recover. In really simple terms this is called a waiver of subrogation.
Each state has their own application and interpretation of subrogation and waivers of subrogation. Check each individual state workers compensation rules to find out how they may apply in your state.
Individual state workers compensation statutes dictate, in some form or another, how an employer and insurer may waive its right to subrogate against another. Some states, like Missouri and Kentucky, do not allow subrogation for workers compensation. Usually the states not allowing subrogation have deemed it to be against public policy. You’ll also find that states allowing waivers require an endorsement (WC 00 03 13 or other) to the workers compensation policy or some other means of consent from the insurance company in order for the waiver to apply.
Workers compensation policies are different than general liability policies. Don’t confuse an employers ability in the general liability policy to waive subrogation rights of the insurance company with those of a workers compensation policy. Take a look at the standard workers comp policy under Part One, section G, Recovery From Others – where it states in paraphrase that we (the insurance company) have your rights to recover payments from those liable for an injury and it goes on to say that you (the insured) will do everything to protect those rights! So in order to waive the subrogation rights of a workers compensation insurance carrier requires the workers compensation policy to be endorsed. This action gives the insurance carrier the opportunity to review the circumstance surrounding the request and to make a decision as to allow or not the waiver of subrogation of their rights.
Be sure to check with your state to make sure workers compensation subrogation and waivers of subrogation are allowed. And if you are a contractor, be sure to read and understand the contract you are signing.
Hope this helps out!