By: Jake Knight J.D. CRIS, IMA Financial & Pete Wiggins, MBA, FIRST, VERIFY
Today, it’s not uncommon for companies to require that any contractor working at their facilities or job sites provide them with proof of a defined level of insurance coverage that includes a waiver of subrogation.
But what is a waiver of subrogation? Before explaining this, one must first understand what subrogation is. From a legal standpoint, subrogation means the right of one person (the subrogor) to step into the shoes of another person (the subrogee) to pursue claims and remedies available to the subrogree. In the insurance context, subrogation occurs when an insurance company pays its insured and then sues the entity or person responsible for the loss to recover the amounts paid to or on behalf of the insured. The insurance company steps into the shoes of the insured and exercises any rights the insured might have against the responsible party.
In all fairness, some in-house systems work very well. Smaller companies that only deal with a limited number of contractors at one location are often successful. Large companies that are willing to invest the resources needed can also have successful systems. The challenge comes once a company has grown beyond the small in-house system and it’s no longer easy to verify the needed information.
Many companies view the cost of maintaining a prequalification department as too expensive for the benefit gained. They usually fall back to setting standards that contractors should meet and charging their project management, Safety and Purchasing teams with enforcing them.
The numbers listed below correspond to blocks of information on the sample ACORD Certificate of insurance.