Even when every safety regulation is followed, construction projects always carry a significant amount of inherent risk to laborers who make the structure happen. For this reason, workers’ compensation policies are a must-have for any company involved in the construction industry. One issue that comes up with workers’ comp claims stemming from an accident on a construction site is subrogation and whether or not contractors and subcontractors waive the right of their insurers to subrogate against third parties. This blog will take a look at what this actually means, as well as benefits of having this provision in your next construction contract. 

What is Subrogation?

When an insurance company subrogates, that means it is attempting to receive compensation from a third party that caused a covered loss for one of its policyholders. Essentially, insurance companies are able to stand as a proxy for the injured party and attempt to get a payout from the other side. 

Why are Waivers of Subrogation Important in Construction Contracts?

It is common knowledge that there is always a risk for workers on construction projects. From time-to-time, injuries will happen; when they do, parties involved in the project want to avoid fights between insurance companies that can complicate matters and sour the project’s mood. There are ways for insurance companies to still subrogate in certain circumstances, but a waiver of subrogation can go a long way toward mitigating complications. 

Generally, there are two different types of subrogation waivers. One type is a blanket waiver of subrogation, which means an insurance company is not allowed to pursue compensation from other providers involved in a specific project. Or, a waiver of subrogation can apply only to particular insurance providers that have a greater possibility of becoming involved in a claim. 

Example of Subrogation (and Waiver)

Consider a project in which parties are constructing a new condominium development. During construction, an employee of the subcontractor responsible for roofing doesn’t secure his materials and it falls from a great height, seriously injuring an employee of the general contractor. Without a waiver of subrogation provision, the insurance company for the general contractor might choose to go after the subcontractor’s insurance company. However, the waiver prevents either side from going after the other. 

Conclusion

The waiver of subrogation clause is just one of many that make up a successful construction contract. Florida Construction Law Group would be happy to look over your contracts and, if necessary, negotiate a fairer deal for you and your team. Give us a call today at 305-227-4030 to see how we can help.