Subrogation is an insurer’s right to step into its insured’s shoes and pursue whoever caused the loss. If a sub’s welding starts a fire, the owner’s builder’s risk insurer pays the owner, then sues the sub to get its money back.
A waiver of subrogation stops that. The contracting parties agree to waive claims against each other to the extent covered by insurance, and their insurers have to agree by endorsement. AIA A201 has a mutual waiver for losses covered by property insurance. Subcontracts commonly require waivers on general liability, auto, umbrella and workers’ compensation policies in favor of the GC and owner.
The logic is efficiency. If everyone is insured for a loss, letting insurers sue each other just moves money around, adds legal cost and creates conflict on the job. Waivers keep the loss with the policy designed for it.
Why it matters
A contract that requires waivers is meaningless if the insurance policy doesn’t allow them. Some policies prohibit waivers without endorsement, and a contractor who waives rights without one can breach its own policy. Workers’ compensation waivers usually carry a small added premium and are limited in some states.
Common mistakes
- Agreeing to a waiver in the contract without getting the policy endorsement.
- Accepting a COI that mentions the waiver without the endorsement itself.
- Not knowing your own property policy’s position on waivers.
- Assuming the waiver applies to losses beyond what’s insured.
How os.construction handles it
We’re building compliance records that track required endorsements, including waivers, against each subcontract’s insurance requirements. It’s in development.