Waiver of Subrogation for Contractors, Explained

You've won the job, the contract is on your desk, and the insurance section says something like: *"Contractor's general liability, auto and workers' compensation policies shall include a waiver of subrogation in favor of Owner and General Contractor."* The GC wants it on your certificate before you start.

A waiver of subrogation is one of the most common contract requirements in construction, and one of the most misunderstood. This article explains what it is, why clients ask for it, which policies it applies to, and how to get it in place without holding up the job.

What subrogation is

When an insurer pays a claim for its policyholder, it generally gains the right to recover that money from whoever caused the loss. That right is called subrogation: the insurer "steps into the shoes" of its insured.

Example: your employee is injured on a job site because of a hazard the general contractor created. Your workers' comp insurer pays the employee's medical bills and lost wages. Through subrogation, your insurer may then try to recover those costs from the GC.

What a waiver of subrogation does

A waiver of subrogation is an agreement that the insurer won't pursue recovery from a specific party, such as the GC or project owner, for losses it pays. In the example above, if your workers' comp policy includes a waiver in favor of the GC, your insurer generally can't pursue the GC for that claim.

Two things usually have to line up for the waiver to work:

1. 1The contract between you and your client says you waive subrogation rights.
2. 2Your insurance policy allows or includes the waiver, usually through an endorsement.

If the contract requires a waiver but your policy doesn't include one, you may be in breach of contract, and your insurer may still have the right to pursue recovery. If you waive rights in a contract without your policy allowing it, you could also affect your own coverage. That's why it's important to review contract wording with your agent before you sign.

Why GCs and owners ask for it

• To keep claims from bouncing between project parties. Construction projects involve many businesses working side by side. Waivers keep insurers from suing the other parties after paying a claim.
• To shift risk to the insurance that was bought for it. The party that buys the insurance relies on it, and the others aren't pulled into litigation.
• Because their own contracts require it. Owners often require the GC to obtain waivers from every subcontractor.

Which policies it applies to

Contracts commonly request a waiver on:

• Workers' compensation. The most frequent request. A waiver on a workers' comp policy is added by endorsement and is often charged as a percentage of the premium for the job or policy.
• General liability. Many GL policies include or can add a waiver of subrogation by endorsement, often tied to written contracts.
• Commercial auto. Available by endorsement on many auto policies.
• Umbrella or excess. These often follow the underlying policies' terms.
• Builders risk and property. Common in owner-contractor agreements, often running in both directions.

Blanket vs. scheduled waivers

Blanket waiver: the endorsement applies to any person or organization you've agreed in a written contract to waive subrogation against. This is convenient if you do many jobs that require waivers.

Scheduled (specific) waiver: the endorsement names specific parties or projects. Each new job requiring a waiver may need a new endorsement.

On workers' comp, the choice can affect cost. A blanket waiver may carry a higher charge than one specific waiver, but less than adding many specific ones. Your agent can compare options for your workload.

Waiver of subrogation vs. additional insured

These often appear together in contracts, but they do different things:

• Additional insured gives your client coverage under your liability policy for certain claims arising out of your work.
• Waiver of subrogation stops your insurer from pursuing your client to recover what it paid.

A contract may require both, plus primary and non-contributory wording. Each is a separate endorsement.

Showing it on your certificate

A certificate of insurance (ACORD 25) has a "SUBR WVD" column for each policy. A "Y" in that column indicates a waiver applies. But the certificate itself doesn't create coverage. The endorsement on your policy does. Many GCs ask for a copy of the endorsement along with the certificate.

Checklist before you sign

• Read the insurance section of the contract and note every policy that needs a waiver
• Send the contract wording to your agent before you sign
• Confirm whether your policies already include blanket waivers
• Ask about any charge for workers' comp waivers
• Request the certificate and endorsements early so they don't hold up mobilization

Capital & Co Insurance Services is an independent insurance agency, CA License #6002332, based at 5455 Wilshire Blvd #1816, Los Angeles. We are not an insurance company. Quotes and coverage are subject to insurer underwriting; submitting a request does not bind coverage. This article is general information, not legal advice.