1. Forms
2. CG
3. CG-24-04

Form CG 24 04: Waiver Of Transfer Of Rights Of Recovery Against Others To Us (Waiver of Subrogation)

1. What the form is

The CG 24 04 is an endorsement to a Commercial General Liability (CGL) policy that modifies the insurer's right to subrogation. Subrogation is the legal principle allowing an insurer, after paying a loss to its insured, to pursue recovery from a third party who may have been responsible for that loss. When this endorsement is added to a CGL policy, the insurer waives its right to recover payments made under the policy from a specific person or organization designated in the endorsement's schedule with whom the insured has agreed in writing to waive subrogation prior to a loss. This means that if the designated third party causes a loss for which the insurer pays, the insurer cannot then sue that third party to recoup its payment. This endorsement is crucial for fulfilling contractual obligations where the insured is required to provide a waiver of subrogation in favor of another party.

2. Classes of business it applies to

The CG 24 04 is commonly used across various industries where contracts often stipulate a waiver of subrogation. Real-world examples include:

• Construction: General contractors often require subcontractors to have this waiver in place, naming the general contractor and/or project owner. This prevents the subcontractor's insurer from suing the general contractor or owner if they are responsible for a loss paid under the subcontractor's CGL policy. This applies to both ongoing operations and products-completed operations hazards.
• Real Estate: Landlords may require tenants to provide a waiver of subrogation in lease agreements. If the tenant's actions cause damage to the property for which the tenant's insurer pays, this waiver prevents the insurer from seeking recovery from the landlord.
• Manufacturing: A manufacturer might enter into a contract with a component supplier that includes a mutual waiver of subrogation. If a defect in the supplied component leads to a claim paid by the manufacturer's insurer, the insurer cannot then sue the component supplier.
• Service Agreements: Businesses providing services to others, such as maintenance contractors or consultants, may be required by their clients to include this waiver in their CGL policy.
• Event Insurance: Venues often require event organizers to have a CG 24 04 endorsement, preventing the event insurer from recovering from the venue if the venue is negligent.

3. Special considerations

There are several important points to consider when using the CG 24 04:

• Written Contract Required: The waiver typically only applies when there is a written contract between the insured and the third party (the person or organization scheduled on the endorsement) where the insured has agreed to waive subrogation before a loss occurs.
• Specific Parties: The waiver applies only to the person(s) or organization(s) specifically named in the schedule of the endorsement or as defined in the contract. It is not a blanket waiver for all third parties.
• Scope of Waiver: The insurer's waiver is generally limited to the extent that the insured has waived its own right of recovery against the third party. Some newer versions of the endorsement clarify that privity of contract between the additional insured and the named insured may not be strictly required, broadening its application.
• Not Automatic: The CG 24 04 is not automatically included in a CGL policy and must be specifically requested and added by endorsement. An alternative, the CG 24 53, offers an automatic waiver when required by contract.
• Does Not Affect Third-Party Liability: The endorsement prevents the insurer from seeking reimbursement; it does not absolve the third party of their legal liability for their actions. The insured may still be able to pursue legal action if the contract allows.
• Interaction with Additional Insured Status: While often requested alongside additional insured status, a waiver of subrogation is distinct and addresses a different aspect of risk transfer. Even if a party is an additional insured, a waiver of subrogation may still be necessary to prevent the insurer from subrogating against that party for payments made on behalf of the named insured.

Real-world example: A subcontractor on a construction project signs a contract with the general contractor that requires the subcontractor to provide a waiver of subrogation in favor of the general contractor. The subcontractor's agent must add the CG 24 04 to their CGL policy, naming the general contractor in the schedule. If an employee of the subcontractor is injured due to the general contractor's negligence and the subcontractor's workers' compensation (though this form is for CGL) or CGL insurer pays, the insurer cannot then sue the general contractor. However, if the contract was not in place *before* the injury, the waiver may not apply.

4. Key information for agents and underwriters

• Pricing: Adding a CG 24 04 endorsement can sometimes result in a slightly higher premium, as it restricts the insurer's ability to recover paid losses. Some insurers may charge a flat fee or a percentage of premium.
• Risk Assessment: Underwriters need to assess the increased risk exposure when an insurer's subrogation rights are waived. This involves evaluating the financial stability and loss history of the party for whom subrogation is being waived, as well as the nature of the contractual relationship. The underwriter should understand the scope of work being performed and the potential for significant losses.
• Coverage Gaps: Agents should ensure the endorsement is correctly completed, with the proper person or organization scheduled. Failure to do so can create a gap in the intended risk transfer. It's also crucial to verify that the contractual requirement for the waiver exists and predates any loss. If a written contract requiring the waiver is not in place before the loss, the endorsement may not respond.
• Underwriting Guidelines: Insurers will have their own underwriting guidelines for when they are willing to provide this endorsement. This may depend on the class of business, the relationship between the insured and the third party, and the specific contractual obligations. Underwriters should carefully review the contract language requiring the waiver.
• Clarity and Documentation: The CG 24 04 provides clarity that the waiver applies as documented in the schedule or declarations of the policy. Agents should advise insureds to maintain copies of all contracts requiring waivers of subrogation.
• Distinction from "Primary and Noncontributory": It's important to understand that the CG 24 04 endorsement does not make the coverage primary and noncontributory for the party in whose favor the waiver is granted. These are separate concepts often addressed by different endorsements (e.g., CG 20 01 for primary and noncontributory additional insured status).
• Newer Versions/Alternatives: ISO has released newer versions of this endorsement (e.g., CG 24 04 12 19) and automatic versions like the CG 24 53. The 2019 revision of CG 24 04 aimed to clarify ambiguities regarding privity of contract. Agents and underwriters should be aware of the specific edition date of the form being used and any relevant state-specific interpretations or regulations.