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Contractor’s Guide to Waiver of Subrogation

Contractor’s Guide to Waiver of Subrogation

For nearly every job and every general contractor, there is a contract in place for subcontractors. As part of that contract, there are insurance requirements. Those insurance requirements usually include a requirement for a waiver of subrogation in favor of the general contractor and/or the project owner. The questions are: what is a waiver of subrogation, and should you give it to them? What is Subrogation? So what, exactly, is subrogation? The term itself translates to “in place of another”. In insurance terms, subrogation is the right of an insurer to attempt to recover money from another party for their involvement in a claim. For example you have full coverage auto insurance and you are involved in an accident for which you are not at fault. Your insurer pays your claim and then turns to the at-fault driver or his insurance company to recover the money paid to you. In contractor’s terms, if a subcontractor’s insurance pays a claim and the general contractor was wholly or partially responsible for the claim, the subcontractor’s insurance carrier may try to recover all or some of the money paid out on the claim. Why You Should Get a Waiver of Subrogation If you are a contractor and you work with subcontractors, it is a good idea to get a waiver of subrogation to protect both your insurance policy and your claims history. Here is how this works: Your policy is protected: Requiring your subcontractors to provide a waiver of subrogation means that if they are sued due to work done by a subcontractor on a job for you, their insurance company cannot...
Contractors: Time for an Insurance Checkup

Contractors: Time for an Insurance Checkup

As Spring begins to bloom, many contractors come out of hibernation. It’s time now for potential customers to start building, trimming, cleaning, mowing, moving, etc. The phone is about to start ringing again. If your business is just starting to gear up again after a long winter’s nap, now is the time to review your business and your insurance coverage. Are you ready for Spring? Has Your Coverage Lapsed? During the lean months of winter, some contractors find their income from the heavy months wasn’t able to sustain times of no work. If you failed to pay your insurance premium, your policy may have lapsed, meaning you have no insurance at this time. Lack of general liability or workers compensation insurance could put you in jeopardy with general contractors, municipalities, and state agencies that require coverage to get, keep and use your business license. Lack of auto liability insurance could risk your driver’s license. Pull out your policies, dust them off, and call your insurance broker to make sure coverage is still in place and valid. When you make that call, go ahead and schedule an appointment for a risk management analysis to review current coverage and see if there is anything else you might need. Check Your Equipment We know you’d never leave for a job site without the proper tools for the job. Have you purchased any new equipment? Are you planning to lease any equipment over the next several months? Review the scheduled equipment on your inland marine policy and compare it to your current tools on hand to be sure they match. If items need...
Homeowners Insurance and the Casual Worker

Homeowners Insurance and the Casual Worker

Finding someone to do certain tasks around your home can be arduous. You can call 15 different companies from the phone book or an online search and get 15 different quotes, if all 15 of those contractors either answer the phone or return a call. It may be tempting to go with the least expensive quote, but cheaper might end up costing you more in the long run. To avoid unexpected expenses, you should take steps to protect yourself. Fernandez v. Lawson In 2002, Mr. Lawson hired a tree service to remove a 50 foot tree from his property. Mr. Lawson received a business card from the owner of the tree service bearing a license number. He requested proof of insurance and was provided a certificate that was expired with a promise that the most recent insurance certificate would be provided the next day. The next day work commenced and Mr. Fernandez, an employee of the tree service, sustained serious injury while attempting to remove the tree. Because his employer was not licensed to remove a tree in excess of 15 feet and did not have workers compensation insurance, he sued the homeowner, Mr. Lawson, claiming that since he was unlicensed he was a de facto employee of the Lawson household. While the lower court did not agree with this statement, the appellate court overturned the decision, deciding in favor of Mr. Fernandez. The court stated that any homeowner hiring an unlicensed and uninsured company to perform work becomes the employer of not only the business, but also its employees. Be The General Contractor On a job where a...
Case Study: Contractor Endorsements

Case Study: Contractor Endorsements

It all happened very quickly, but the consequences continue to affect a subcontractor. This company found out the hard way that those primary and noncontributory and waiver of subrogation endorsements aren’t as harmless as they seem. A subcontractor was working on a large remodel job with a large general contractor (GC) about five years ago doing demo work. The GC’s foreman was onsite while the sub was working on grinding down rebar and offered to help. As the foreman was finishing up the piece he was grinding, the rebar got caught on the grinder. The rebar shot out like a bullet and hit someone standing in the parking lot and cracked his skull.  Thankfully, it didn’t penetrate. In this case, the foreman who was working the grinder was not an employee of the subcontractor, he was employed by the GC.  However, the subcontractor, prior to work being performed, had provided a certificate of insurance to the GC. This certificate included primary & noncontributory and waiver of subrogation in favor of the GC as required by contract. What Happened Next The claim was settled for $150,000. Since the foreman was an employee of the GC, the injuries caused should have been the responsibility of the GC. Guess who paid? The insurance company for the subcontractor.  Why? The certificate provided included primary & noncontributory wording in favor of the GC. This puts the responsibility for the claim directly at the doorstep of the subcontractor. The sub’s insurance is primary and does not allow for the contribution of any other insurance policy, regardless of any other party’s responsibility for the accident. In...

Finally, a Helpful Guide to Additional Insured

With any written contract there are certain obligations that must be met by both parties, including work to be performed, timelines and requirements for a smooth working relationship.  This is true whether it is a contract for work being done or space being occupied. Most contracts today now have certain insurance requirements that must be met.  One of those usually requires the second party of the contract to include the first party as an additional insured. So what is an additional insured, and why does everyone want it?   Additional Insured is NOT a Co-Insured The first additional insured endorsement added to a General Liability policy was the CG 2010 1185 (Additional Insureds – Owners, Lessees or Contractors).  This form was intended only to add an additional insured to the policy for notification purposes in the event of a policy cancellation. However, due to the vague nature of the form, courts began awarding coverage to the additional insured under the named insured’s policy.  This effectively made the additional insured a co-insured or an additional named insured under the policy and covered the additional insured’s operations, as well.  This was not the intention of the endorsement.   Additional Insureds Do NOT Get (Much) Coverage The Insurance Services Office created several endorsements later that were intended to correct this issue.  Subsequent endorsements were designed to offer notification and limited legal representation to additional insureds. One endorsement that replaced the CG 2010 1185 was the CG 2037 0704 (Additional Insured – Owners, Lessees or Contractors – Completed Operations).  This endorsement allows for notification of the additional insured.  It also offers some legal...