Often, you will hear the term subrogation when dealing with association vendors and their workers’ compensation policies. If a painting contractor trips while working on your property, who will pay for his injury? Would your general liability policy cover him since he was hurt on your property, the painting company’s workers’ compensation policy because the painter was injured while working, or both policies?
When there is an accident on property, a third party, such as an insurance company, could step in to bring a claim for damages. This is known as subrogation. This is a pretty common practice in other situations too. If you are involved in a car accident because of the other party’s negligence, your insurance company may pay you for the loss, then attempt to recover damages from the driver who was at fault. The insurance company has subrogated your rights for the damage caused by the at-fault driver.
To avoid subrogation, a waiver could help when hiring contractors and other third parties on your property.
What is a Waiver of Subrogation?
This waiver is a stipulation in a contract that prevents the vendor’s insurance company from trying to recoup money from you. It’s important because aside from keeping the loss off your policy, you won’t be involved in legal action when you may have contributed to the worker’s injury. Using the example above, should the contracted worker’s compensation policy have a waiver of subrogation that favors the association, the insurance company would be prevented from seeking money from you for treatment related to the contractor’s injury.
When should you ask for waiver of subrogation?
You should ask for a waiver of subrogation from all interested parties: general liability and workers’ compensation insurance companies, and from your contractor’s property. Many policies will allow you to waive subrogation through the contract prior to a loss without cost to you, but a workers’ compensation policy will cost you a fee to include the waiver.
In general, you shouldn’t need a waiver of subrogation if you’re an additional insured on the contractor’s liability policy because insurers aren’t allowed to subrogate against their own insureds, so you shouldn’t need one. However, it can’t hurt to ask for it as it rarely costs anything.
As in all legal matters in which you have questions, please consult your association’s attorney or insurance agent for answers specific to your situation.