1. Forms
2. WC
3. WC-00-03-02

Form WC 00 03 02: Waiver Of Our Right To Recover From Others Endorsement

1. What the form is:

The WC 00 03 02, titled "Waiver Of Our Right To Recover From Others Endorsement," is a standard endorsement used in Workers Compensation and Employers Liability insurance. Its primary purpose is to amend the policy so that the insurer gives up its right to sue a specific third party to recover claim payments made on behalf of the insured. This right is known as subrogation. Normally, if an employee is injured due to the negligence of a third party (not the employer), and the workers' compensation insurer pays benefits, the insurer can then pursue that negligent third party to recoup those payments. This endorsement, when added to the policy, specifically names a person or organization against whom the insurer will not enforce this right of recovery. It's important to note that this waiver typically applies only when there's a written contract between the insured and the third party requiring the insured to obtain such a waiver.

2. Classes of business it applies to:

This endorsement is widely used across various industries, particularly where contracts between parties dictate risk allocation. Some common scenarios include:

• Construction: This is a very common area. General contractors often require their subcontractors to provide a waiver of subrogation in their favor. For example, if a subcontractor's employee is injured due to the general contractor's negligence on a job site, and the subcontractor's workers' compensation policy has this waiver naming the general contractor, the subcontractor's insurer cannot sue the general contractor to recover the claim costs.
• Service Industries: Businesses that perform services on others' premises might be required to provide this waiver. For instance, a staffing agency providing temporary workers to a client company might need to waive subrogation rights against that client. If a temporary employee is injured at the client's location due to the client's negligence, the staffing agency's insurer, having issued the waiver, cannot seek recovery from the client.
• Landlord/Tenant Agreements: In commercial lease agreements, a landlord might require a tenant to have this waiver in place, or vice-versa, to prevent lawsuits between their respective insurers.
• Vendor/Client Relationships: Companies hiring vendors or contractors for specific projects may contractually require a waiver of subrogation to protect themselves from potential lawsuits stemming from injuries to the vendor's employees. An example would be a paper mill requiring a timber harvesting company to provide a waiver of subrogation as part of their contract.

3. Special considerations:

• Contractual Requirement: The most significant consideration is that this endorsement is almost always driven by a contractual agreement between the insured and a third party. The third party (e.g., a general contractor or client) will stipulate in their contract that the insured (e.g., a subcontractor or vendor) must obtain this waiver. Without such a contractual obligation, there's usually no reason for an insured to request this endorsement.
• Specificity: The endorsement must specifically name the person or organization against whom subrogation is waived. There is also a "Blanket Waiver of Subrogation" which applies more broadly to any party for whom the insured has agreed by contract to waive subrogation, but the WC 00 03 02 is typically for specifically scheduled entities.
• Impact on Insured's Loss Experience: When an insurer waives its right to subrogate, it cannot recover claim costs from a negligent third party. These unrecovered claim costs will remain on the insured's loss record and can negatively impact their experience modification factor (E-Mod), potentially leading to higher future premiums.
• No Benefit to Unnamed Parties: The endorsement explicitly states that the agreement does not directly or indirectly benefit anyone not named in the schedule.
• State Variations and Approval: While "All States" is listed as applicable, specific state rules or interpretations might exist. For example, New York has specific rules regarding premium charges for this waiver. It's crucial to ensure the endorsement is correctly applied according to the relevant state's workers' compensation laws and regulations.
• Wrap-Up Programs: In construction, this endorsement might be used in conjunction with wrap-up insurance programs (OCIPs or CCIPs). However, a more common endorsement in wrap-up scenarios might be the WC 00 03 02 – Designated Workplaces Exclusion Endorsement, which excludes coverage for specific projects covered by the wrap-up. The Waiver of Our Right to Recover From Others Endorsement serves a different function by allowing the subcontractor's policy to respond but preventing subrogation against the general contractor or project owner if they are named in the waiver.

4. Key information for agents and underwriters:

• Pricing/Premium: Insurers typically charge an additional premium for this endorsement because they are giving up a valuable right of recovery. The premium can be a percentage of the policy premium, a flat fee, or a percentage of the premium associated with the specific project or contract requiring the waiver. For example, in New York, the charge can range from 5% to 10% of the standard premium for the work being waived, subject to a minimum premium. Underwriters need to assess the increased risk exposure.
• Risk Assessment: Underwriters must carefully evaluate the third party being named in the waiver. If the third party has a poor safety record or operates in a high-risk environment, the likelihood of a claim occurring where subrogation would otherwise be possible increases. This heightened risk justifies the additional premium and may even lead to a declination if the risk is too severe.
• Contract Review: Agents and underwriters should encourage insureds to provide the relevant sections of contracts requiring this waiver. This allows for verification that the endorsement is being issued correctly and that the named entity matches the contractual requirement.
• Coverage Gaps: While this endorsement addresses subrogation, it doesn't create coverage where it wouldn't otherwise exist. It's crucial to ensure the underlying policy provides the necessary coverage for the work being performed.
• Documentation: Proper documentation of why the waiver is being provided, including the contractual requirement, is essential for the underwriting file. This is important for audit purposes and to justify any premium charges.
• Alternative Endorsements: Be aware of other related endorsements. For instance, the Alternate Employer Endorsement (WC 00 03 01) is used in situations involving temporary or leased employees to provide coverage to the client company as an alternate employer, which is different from a waiver of subrogation.