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Moore: The Misunderstood Waiver of Subrogation Endorsement

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The waiver of subrogation endorsement appears in almost all workers’ comp policies.  Almost all workers’ comp personnel and insureds do not ever read any policies. Who wants to read 40 pages of droning on when the dec page covers everything one needs to know concerning a policy? 

James Moore

James Moore

Please think again on this point: Endorsements can change the face of a policy dramatically

If you check out a few articles written on endorsements, the need to be aware increases for any endorsements insurers add at the time of policy inception (start) or during the policy period.

The waiver of subrogation endorsement always meant (in my opinion) the carrier desires to retain the right to bring a lawsuit against any third parties. The insured employer signs over those rights at the beginning of and during the policy. 

The insurer wants an unfettered ability to recover any claims money spent out with adjusting a claim. Of course, the insured would receive a credit for any recovered subrogation funds. The carrier is supposed to file correction reports with the rating bureaus (NCCI, WCIRB, etc.) that may result in a lower X-mod for the employer.  

Each employer willing to waive its right to recover from or litigate receives a credit. Pull out your current policy or an old premium audit bill or statement. The credit appears in both, along with a nominal refund of sorts.  

Understanding and applying the waivers may be of great benefit to employers. Some states do not allow the carrier to bring suit against a responsible third party directly. The carrier must ride on the coattails of the injured employee instead of moving the employee out of the way and litigating the responsible third party directly. 

A great multi-state law office, MWL and counsel Gary Wickert, combined all the workers’ comp waiver of subrogation considerations in all 50 states. Adjusters and their supervisory staff should keep a copy of the waivers of subrogation at their fingertips. 

Insured employers should understand their rights under a waiver of subrogation. Download that PDF file here.  

Their introductory paragraph reads:

Most state workers’ compensation laws, or cases construing them, allow the employer and its carrier to waive its right to subrogate against a third party that caused or contributed to an employee’s injury. The purpose of a subrogation waiver is not well understood and is a subject of some confusion in the marketplace. Most frequently, contracting parties agree to contractually require the inclusion of a waiver of subrogation endorsement in a workers’ compensation policy simply because the requirement is contained in the form contract, and has been for many years.

A recent NCCI symposium in Virginia covered workers' comp megaclaims. The number one megaclaims by far are automobile accidents. Auto accidents remain the easiest claims for a work comp claims adjuster to subrogate the funds paid.   

Sending a letter to the auto adjuster to retain the carrier’s lien is very easy. Monitoring the status of the subrogation lien becomes critical.

I have reviewed more than a few files where the workers’ comp adjuster notifies of the lien and then lets it go at that point. The injured employee’s liability claim attorney may not pay one-third of the funds because of one letter.  

Many WC adjusters tend to just specialize in one line of claims. The specialization is fine except when subrogation potential appears in a claim. When I started my insurance career in the 1980s, adjusters were almost exclusively multi-line. In other words, the adjuster knew just exactly how to pursue a third-party workers’ comp matter as he/she had adjusted claims outside the workers’ compensation arena.   

This blog post is provided by James Moore, AIC, MBA, ChFC, ARM, and is republished with permission from J&L Risk Management Consultants. Visit the full website at www.cutcompcosts.com.

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