A regular review of every snow and ice management contract you sign is an important segment of the risk management process. The contract may include a provision requiring a waiver of subrogation (WOS) in favor of the property manager or owner for whom the snow removal contractor is performing services. If this is the case, then the snow removal contractor must make sure the WOS endorsement is first, available; and second, is added to their snow removal general liability policy.
Subrogation is an insurance concept used in insurance policies, which are contracts. A loss typically occurs through the negligence of either the snow contractor or the property owner/manager. Generally, the negligent side or “at-fault” party is responsible for the defense and cost of the loss. However, the claim may initially be paid by the snow contractors’ insurance carrier based on some “comparative fault.”
The insurance carrier could then seek compensation from other at-fault parties to recover a portion or all of the amount the snow contractor’s policy have paid. This process is known as subrogation. You may find this subrogation term in your snow removal contract, referred to as, “Transfer of Rights of Recovery Against Others to Us,” in the insurance policy. This clause allows the insurance carrier to “wear the boots” of the snow contractor, and pursue a claim against other at-fault parties through the process of subrogation.
A WOS must be in writing before there is a known loss. Often a WOS endorsement refers to an exact contract as a means of clarification. There are a few caveats to the use of WOS clauses, and hence; how an insurance policy may be endorsed.
In some jurisdictions, a WOS may not be available. Therefore, a careful review of a state statutes is required. Ask you agent about your workers’ compensation carrier’s position and agreement before agreeing to waive your rights of subrogation.
Read the contract. Make sure you understand the executed written contract and the wording should be thoroughly reviewed by a snow competent attorney to understand the contract intent appropriately. For example, mutual waivers may be beneficial in landlord/tenant contracts, where all parties waive their rights. However, in snow removal contracts, mutual waivers may not be acceptable or prudent.
When used properly, a WOS clause will minimize cross suit claims between the parties, in most cases we are keeping the snow removal contractor and the property owner/manager. This is clean and will keep snow contractor and property owner on the same side which is the goal.
Once the claim has been accepted and settles with a third party or commonly the slip-and-fall pedestrian, there is no further recourse against the party named in the WOS endorsement. What we are fighting for is that a claim is representative and corresponds to an at- fault party. Without a WOS clause in the agreement and insurance policy, litigation or arbitration is frequently needed to sort out the battle between property owner and snow contractor adding inflated cost to figure out who is going to step up and defend the claim.
This is especially an issue as the ASCA legislative board is aware of in states where comparative liability may be shared. A WOS allows for the timely settlement of claims and avoids costly litigation.
So, review and understand the both your contracts and how insurance interacts with them. It’s important that all contractual language agreed to is consistent with how your insurance policy is constructed. As your snow removal insurance agency of choice, we are committed to helping you understand how your policy addresses the issues created by the contracts you agree to. Mills Insurance wants to learn more about how we can assist you. Please support the those who support you.