Waivers of Subrogation & Additional Insureds

1. Waivers of Subrogation& Additional Insureds Presented by: Monica McNally April 3, 2006

2. What is a Waiver? • Agreement not to subrogate • Eliminates ability to assign negligence to responsible party • Eliminates ability for your insurance carrier to recover $ paid • Knowingly allocates risk to a specific party who agrees to assume risk regardless of fault

3. Do’s and Don’ts • Do have your insurance agent and/or attorney review language before you sign • Do give your insurance agent copies of contracts • Do try to obtain mutual waivers • Do try to limit “to extent permitted by insurance policy” • Don’t sign Waiver after a loss • Don’t agree to a waiver that is unreasonable

4. Common Instances Involving Waivers • Lease Agreements • Sub-Contractors you hire • Municipalities • Large customers (i.e. Fortune 500 accounts)

5. Claims Examples • Lease contains waiver • You suffer water damage caused by poor maintenance of landlord. Your property carrier pays damages. Carrier cannot recoup $ paid for loss even though due to negligence of others • Employee collects WC for accident occurring on a customer’s premises • Employee sues customer and wins • Waiver prevents carrier from recovering from customer • Employee collects 2X • If 3rd party (i.e. Customer is actually negligent) you end up paying the cost in your Experience Modification

6. Additional Insureds • Provides defense and indemnity • Know whether coverage is excess or primary • You share your limits • Can cover even if Additional Insured is negligent • Higher ultimate insurance cost to you

7. What Can You Do? • Negotiate it out of contract terms • Refuse to enter into contract • Do not take request lightly

8. Example of a Current Claim Reserve = $500,000 • Our Insured contracted with a 3rd party to collect their scrap • Claimant was a truck driver – independent contractor hauling for insured • 3rd party employees actually loaded scrap into truck • Disagreement over who directed loading – claimant or 3rd party & who had control – driver or fork lift operator • Claimant severely injured when pipe fell off fork lift and then off truck – primarily to face • Our Insured not named as party to suit