When you are a contracting with ISNetworld® and an Owner Client requires you to have specific insurance requirements there are certain implications this has on your company. Not only do you have a contract, vendor agreement or master service agreement for specific services, but the insurance requirements that the company requests you have creates new conditions under the contract. For example if you have a contract with an owner client, called Big Company Inc. to perform 15 hours of service a week in exchange for $1,000 payment per week. These conditions in addition to having an account with ISNetworld® are the only conditions in your contract. However, you must have insurance. After answering the pre-questionnaire on ISNetworld® your insurance requirements are specified. If you don’t have these specific requirements in your certificate of insurance or COI, then your insurance will not be verified through ISNetworld®. If you do not receive this verification you are not in compliance with the terms of your contract and you may lose your opportunity to work for Big Company Inc., which in turn makes you lose money.
Meeting all of the insurance requirements is very important. One of those terms will be a waiver of subrogation clause. This clause is most likely will be placed on your COI and will have similar verbiage to “waiver of subrogation in favor of Big Company Inc.” But the implications that this clause has on your company is large. This simple statement means that you are agreeing to give up your rights to a lawsuit, claim or discussion if another company is negligent in any way.
For example: You contract with Big Company Inc. for services and your COI contains a waiver for subrogation, that states “Waiver of Subrogation in favor of Big Company Inc.” You are on the job site and an employee of Big Company Inc. is negligent and drops an axe on one of your employees cutting off their foot. Your employee goes to the hospital, incurs hundreds of thousands of dollars in medical bills and is now on disability. What does this mean for your company? Because your company agreed to the waiver of subrogation you cannot sue Big Company Inc. for their negligence, you must make a claim on your insurance to cover the cost of the employee, your workers compensation claims increase and your experience modification rating is increased. On the other hand Big Company Inc. is not affected at all because you agreed to hold them NOT liable in any way while performing services for them. This is what the waiver of subrogation does. It holds the company you are contracting with not liable if they are or are not liable. The only person who benefits from this waiver is the owner client.
The best thing to do is avoid blanket waivers of subrogation. This means not to have a waiver of subrogation that is very broad that it only benefits the owner client. Instead make a waiver of subrogation more specific. One way of doing this is by qualifying it, therefore, you agree to a waiver of subrogation but only when you, your company or employees are at fault. You could include language similar to:
“It is agreed that as respects Additional Insured’s covered under this policy we waive our right to subrogate against the Additional Insured where the named “insured” has waived its right of subrogation against such Additional Insured as part of a written contract with the name ensured, but only where the claims, suits and/or damages in question arise out of the sole negligence of the named insured. This waiver afforded shall not apply to claims, suits and/or damages arising in whole or in part out of the acts, omissions, and/or negligence of the Additional Insured.”
**Instead of saying Additional Insured you may use the owner client’s name. This is just an example and you should discuss it with your insurance broker before submitting the certificate of insurance to ISNetworld®. Insurance varies from state to state and internationally. Please remember that this is just my opinion and should be discussed with an insurance broker.**
Most of the time, ISNetworld®’s review process should approve the waiver of subrogation that is qualified because they only check to see if a waiver of subrogation exists. However, please note that you may not be able to do it all of the time or in certain jurisdictions. It is best to qualify your waiver. It is hard enough for a company to pay increased costs when their employees are negligent, but when it is another person’s employees or company that is negligent your company should not have to pay for their mistakes. It is not just a simple clause to agree to. There are other implications that can cost your company a lot of money.
- Discuss your options with your insurance broker.
- Determine what is right for your company.
- Review the costs associated with an insurance claim on your insurance.
- Know what you’re agreeing to before submitting your certificate of insurance.
- Don’t be afraid to submit a certificate with a qualified statement regarding waivers of subrogation.
- Try to avoid blanket waivers of subrogation