What is a "waiver of subrogation"?

Subrogation is a legal term that means the assumption by a third party of another's legal right to collect a debt or damages. For example, subrogation occurs when an insurance company that has paid off its injured claimant takes on the legal rights the claimant has against the potentially liable third party (such as the owner of the property where the policyholder’s injured employee was working), and attempts to collect compensation from that third party.

A waiver of subrogation policy endorsement prevents an insurance company from trying to recover those costs. In other words, if State Fund provides you a waiver of subrogation, we can't sue the person or company that caused the injuries on the claim we already paid.

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What types of waivers of subrogation does State Fund offer?

State Fund offers two types of waivers: (1) A specific waiver (Endorsement 2570) that names the third party with whom you have a contract to perform work; (2) A blanket waiver (Endorsement 2572) that does not name a third party—it applies to all the jobs where you perform work under a contract with a third party who requires a waiver of subrogation.

Quotes issued for policies incepting on September 1, 2013, or later will include the Blanket Waiver endorsement and the related premium charge if you request the endorsement with your application.

If the Blanket Waiver endorsement is not requested prior to the inception of your policy, it will not be added until your next renewal.

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Is there a fee for a waiver of subrogation?

There is a three percent surcharge for a specific waiver that is applied to the premium assessed on employee payroll earned while working for the certificate holder who requested the waiver. (Note: There is no charge if you have no employee payroll on that job). There is a two percent surcharge applied to your total annual policy premium for a blanket waiver.

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How do I determine whether a blanket waiver or a specific waiver is best for me?

The best way to assess whether a blanket waiver or specific waiver is best for your client is to evaluate the cost of the surcharges. Estimate what two percent of the annual premium would be, then figure out the premium associated with third parties that require a waiver. If it is less than two-thirds of two percent of your annual premium, then the specific waiver may carry less of a surcharge. You may also want to factor in the cost of requesting the specific waivers each time one is needed versus requesting the blanket option upfront—doing so may make the blanket waiver a better option.

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I seldom have a written contract with a third party that has a waiver of subrogation requirement in any one year. Should I still go with a blanket waiver? 

A blanket waiver may be the best option if you have multiple written contracts that require waivers of subrogation that cover much of your business activity in a year. It may also be a good option if you want the ease associated with one decision at the time your policy is renewed, which eliminates the need to provide segregated payroll records to the State Fund premium auditor.

If the third party requesting the waiver wants to be specifically named and won’t accept a blanket waiver of subrogation, you can have a specific waiver endorsed to your policy. There will not be an additional surcharge for the specific waiver in this special situation as long as the blanket waiver is on the policy and the two percent premium charge has already been applied.

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Can I delete a waiver of subrogation?

No. We cannot delete a waiver of subrogation endorsement during the policy term.

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Why didn’t the certificate renew with the endorsements?

Some endorsements, such as those for a “waiver of subrogation” and “agreed payroll,” will not automatically roll over to the renewing policy year because there are surcharges that require a policyholder’s request and acceptance. Contact your State Fund representative or broker to request these endorsements.

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