In the construction industry, navigating insurance terms like waivers of subrogation and Owner Controlled Insurance Programs (OCIPs) is critical for managing risk and ensuring compliance with contracts. Below, we break down these concepts clearly to help contractors and business owners make informed decisions.

What is a Waiver of Subrogation?

A waiver of subrogation is an insurance policy endorsement that prevents an insurance carrier from recovering claim payments from another party who may be responsible for an injury or loss. Essentially, it stops the insurer from “stepping into the shoes” of the insured to pursue recovery from a third party.

There are two main types of waivers: Blanket and Named (Specific).

1. Blanket Waiver of Subrogation

• What it does: Applies to all parties the insured is contractually obligated to waive subrogation rights for, without listing specific names.

• When it’s used: Ideal for businesses with multiple contracts (e.g., with various contractors or clients) requiring waivers.

• Benefits:

  • Flexibility: Covers any party under a qualifying contract without needing individual endorsements.

  • Cost-effective: Reduces administrative hassle and often costs less for businesses with multiple agreements.

• Example: A general contractor working on multiple projects can use a blanket waiver to cover all clients without updating the policy for each one.

2. Named (Specific) Waiver of Subrogation

• What it does: Applies only to a specific entity or individual named in the endorsement.

• When it’s used: Required when a contract explicitly names a party (e.g., a client, contractor, or vendor) for whom subrogation rights must be waived.

• Considerations:

  • Requires identifying the exact party in the policy.

  • May involve additional underwriting and higher costs, as each named party is added individually.

• Example: A subcontractor might need a named waiver for a specific project owner as part of a contract.

Key Differences

Note: While “Blanket” and “Named” are standard terms, some insurers may use variations like “specific” instead of “named.” Always review your policy language and state regulations, as requirements can differ.

Why Are Waivers of Subrogation Excluded in OCIP/Wrap-Up Programs?

An Owner Controlled Insurance Program (OCIP), also known as a Wrap-Up, is a centralized insurance policy purchased by a project owner to cover all parties involved in a large construction project, including the owner, general contractor, and subcontractors. It typically includes general liability, workers’ compensation, and other coverages, streamlining risk management and often reducing costs.

However, commercial insurance carriers typically do not provide waivers of subrogation for projects covered by an OCIP. Here’s why:

1. Avoiding Duplicate Coverage: The OCIP provides comprehensive liability coverage for the project, so a contractor’s general liability (GL) policy excludes OCIP projects to prevent overlapping coverage and potential claims disputes.

2. Premium Adjustment: Excluding OCIP projects allows insurers to lower premiums, as they aren’t assuming risk for those projects.

3. Simplified Claims Handling: Claims are managed under the OCIP policy, reducing conflicts between insurers.

4. Specialized Risks: OCIP projects are often large and complex, with risks not suited for standard GL policies. Insurers exclude them to limit exposure.

Need Help Navigating Insurance Requirements?

Understanding waivers of subrogation and OCIP exclusions can be complex, but we’re here to simplify it for you. Whether you’re a contractor, subcontractor, or project owner, The Contractors Resource Center is your trusted partner for insurance clarity.

Have questions? Contact us at [email protected] for expert guidance tailored to your needs.