Waiver of Subrogation for Wisconsin Contractors: What It Means and When to Sign

Few phrases in a construction contract get signed with less thought than "waiver of subrogation." It usually sits in the insurance exhibit next to additional insured and primary and noncontributory wording, and most contractors assume their agent will sort it out later. For Wisconsin contractors, a waiver of subrogation is a real promise with real consequences, and if your policies do not back it up, the gap lands on you.

This guide explains what a waiver of subrogation actually does, which policies it applies to, the difference between blanket and specific waivers, what it can cost, and what to check before you sign. MM Insurance Associates is an independent agency in New Berlin that has helped Wisconsin contractors with contract insurance requirements since 1997.

If you are new to these terms, start with our contractor insurance glossary, which covers the language that shows up in most Wisconsin subcontracts.

What Subrogation Means in Plain English

Subrogation is the right of an insurance company, after it pays a claim, to step into its customer's shoes and recover that money from whoever caused the loss. If your carrier pays for damage or an injury and someone else was at fault, your carrier can pursue that party to get its money back.

Here is a simple example. A drywall subcontractor's employee is hurt on a jobsite because the general contractor left a floor opening unguarded. The subcontractor's workers compensation carrier pays the medical bills and lost wages. Without a waiver, that carrier may go after the general contractor to recover what it paid. With a waiver of subrogation in favor of the general contractor, the carrier has agreed in advance not to pursue that recovery.

A waiver of subrogation is the contractual promise that you, and through your policy your insurance company, will give up that right of recovery against a named party. General contractors and owners ask for it because it keeps claims from turning into lawsuits between the companies working on the same project.

Which Policies a Waiver Usually Applies To

Most Wisconsin construction contracts ask for a waiver on three or four lines of coverage. Each policy needs its own wording, so a change on one does not carry over to the others.

Workers compensation

This is the waiver contractors see most often, and usually the one with the most at stake. Employee injuries are common on construction sites and often involve another contractor's conduct. General contractors want to know the subcontractor's workers compensation carrier will not come after them once a claim is paid. On a workers compensation policy, the waiver is added by a specific form, and many carriers charge an additional premium for it.

Our workers compensation page explains how coverage works for Wisconsin employers in more detail.

General liability

A general liability waiver means your carrier will not pursue the named party to recover a liability claim it paid on your behalf. Many contractor general liability policies can be written with a blanket waiver that applies whenever a written contract requires one, which makes this the easiest line to handle.

Commercial auto

Some contracts also require a waiver on your commercial auto policy. It is easy to miss because auto coverage is often written separately from the rest of the contractor package. If the contract lists auto, confirm that policy carries the wording too.

Umbrella or excess liability

When a contract requires umbrella limits, it often expects the waiver to follow through to the umbrella. Ask whether your umbrella follows the underlying policies on this point or needs its own wording.

Blanket Versus Specific Waivers

There are two ways to put a waiver on a policy, and the difference affects both your paperwork and your cost.

• A blanket waiver applies automatically to any person or organization you have agreed in a written contract to waive rights against. You do not need to call your agent every time you sign a new job.

• A specific, or scheduled, waiver names one particular party on the policy. Each new general contractor or owner has to be added before the job starts, and a missed addition can put you in breach.

For most contractors who work for several general contractors a year, a blanket waiver on general liability and workers compensation is the cleaner option. Read the blanket language closely, though. Most versions only apply when the waiver is required by a written contract signed before the loss. A handshake agreement or a contract signed after the work started may not qualify.

What a Waiver of Subrogation Costs

On general liability, a blanket waiver is often included in a contractor package or added for a modest flat charge. Workers compensation is different. Many carriers price the waiver as a percentage of the premium on the payroll tied to that job or, for a blanket waiver, the policy as a whole. The exact charge varies by carrier and by state, so ask for it in writing before you commit.

Two practical points help keep this cost under control:

• Build the waiver charge into your bid when the contract requires it. It is a legitimate cost of doing that job.

• Track which jobs actually required a waiver. At your premium audit, accurate job records help make sure any job specific waiver charge is calculated on the right payroll.

Common Mistakes Wisconsin Contractors Make

Most waiver problems show up only after a claim, when it is too late to fix them. These are the ones we see most:

• Assuming the certificate of insurance creates the waiver. It does not. The certificate only reports what the policy says, and the policy has to carry the actual wording.

• Covering general liability but forgetting workers compensation, which is the line most likely to see a claim.

• Signing a contract that requires the waiver on behalf of a long list of parties, such as the owner, the architect, the lender, and every affiliated company, without checking that your wording reaches all of them.

• Agreeing to waive rights in the contract when your policy has no waiver at all. If your carrier then loses its recovery rights because of your contract, you may be in breach of your own policy conditions.

• Missing the waiver on your subcontractors. If you hire subs, ask them for the same waivers your general contractor asked of you so the risk flows down the chain.

Our deep dive on the certificate of insurance explains what that one-page form proves and what it leaves out.

How a Waiver Fits With Additional Insured and Primary Wording

A waiver of subrogation almost never shows up alone. Contracts usually request it as part of a set with additional insured status and primary and noncontributory wording. Together, those three terms tell the general contractor that your policy will defend them, will pay before their own policy, and will not try to recover the money from them afterward.

If you have not already, read our guide to additional insured status, since the two requirements are usually reviewed together.

The simplest habit is to send the insurance section of every contract to your agent before you sign it. That way the waiver, additional insured, and primary wording can be matched to your policies while there is still time to make changes or price them into your bid.

You can also learn more about how we structure contractor coverage on our business insurance page.

Frequently Asked Questions

What is a waiver of subrogation in a construction contract?

It is an agreement that you and your insurance carrier will not try to recover claim payments from a named party, usually the general contractor or project owner, even if that party caused the loss.

Does a waiver of subrogation cost extra?

Often it does, especially on workers compensation, where many carriers charge a percentage of premium. On general liability, a blanket waiver is frequently included in contractor packages or added for a small charge.

What is the difference between a blanket and a specific waiver of subrogation?

A blanket waiver applies to anyone you agreed to waive rights against in a written contract. A specific waiver names one party on the policy, so each new party has to be added before work begins.

Does a certificate of insurance prove I have a waiver of subrogation?

No. A certificate only summarizes coverage. The waiver has to exist on the policy itself, so ask your agent to confirm the wording is in place on every line the contract requires.

Which policies usually need a waiver of subrogation?

Most contracts ask for it on workers compensation and general liability, and many also list commercial auto and umbrella or excess liability. Check the contract's insurance exhibit for the exact list.

Should I ask my subcontractors for a waiver of subrogation?

Yes, in most cases. Asking your subs for the same waivers your general contractor requires of you keeps the risk with the party doing the work and protects your own policy.

Get Your Contract Requirements Reviewed

A waiver of subrogation takes one line in a contract and can decide who pays for a serious claim. Call MM Insurance Associates at (262) 754-4736 to have a licensed agent review the insurance section of your next contract and confirm your policies match what you are signing.

You can also get started online through our customer portal and we will follow up with the coverage details that fit your operation.