Waiver of Subrogation

MCIT shares the following information with members because frequently they are asked to enter into contracts that contain waiver of subrogation provisions. In most cases, MCIT asks members not to jeopardize the right to recover damages from a negligent party.

Workers’ Compensation

Appropriate reinsurance to cover catastrophic claims and a successful subrogation program are important parts of maintaining the fiscal health of MCIT. Like any standard workers’ compensation policy, the MCIT Workers’ Compensation Coverage Document contains a condition designed to protect the right of subrogation and the ability to recover a loss.

The Recovery from Others Provision states: “We [MCIT] have your rights, and the rights of persons entitled to the benefits of this coverage, to recover our payment from anyone liable for the injury. You will do everything necessary to protect those rights for us and help us enforce them.”

MCIT is reinsured against catastrophic workers’ compensation claims through the Workers’ Compensation Reinsurance Association (WCRA). The WCRA requires MCIT to pursue subrogation of claims unless they have agreed otherwise.

According to the WCRA Plan of Operation, Article VI (H), “Each member [MCIT] shall, to the extent permitted by law, prosecute or intervene in any and all claims the member or an employer, employee, beneficiary or other person may have against any third party arising out of any Loss Occurrence. A member may waive its subrogation rights in writing in advance of any Loss Occurrence.”

With respect to workers’ compensation, MCIT cannot approve waiver of subrogation language in contracts due to WCRA guidelines. Upon request, the WCRA will review and consider for approval pre-loss waivers of subrogation, depending on the risk.

For prior approval, MCIT must provide to the WCRA the basic facts of the contract and circumstances of the waiver of subrogation provision. If approved, MCIT will receive a confirmation notice from the WCRA.

Liability and Property

With liability and property coverages, when a third party asks a member to include a waiver of subrogation in an agreement, both MCIT and the member are at risk. The typical language requires waiving subrogation to the extent insurance covers the damages. The waiver language often extends to all bodily injury and property damage regardless of insurance.

If a member agrees to waive subrogation, it could prevent MCIT and the member from recovering damages from a negligent party after a loss. Recovering those costs replenishes MCIT and helps maintain the integrity of the pool.

Such recoveries are important for members, as adverse loss affects both rates and dividends.

If the member cannot recover, the loss remains self-funded or member expense. Those costs could include the deductible, amounts excluded from coverage, incidental costs, consequential damages and uninsurable elements.

Therefore, MCIT asks members not to jeopardize their right of subrogation and to require that waiver of subrogation wording be deleted from agreements.

As a reminder, MCIT coverage conditions prohibit members from waiving subrogation after a loss.