Month: May 2021

If you’ve ever signed a lease agreement or business contract, you might have come across the term “waiver of subrogation.” When engaging with a landlord, client, or business partner, the other party may request for you to include this technical-sounding term in your insurance policy. In this article, we’ll explain what “waiver of subrogation” means, the implications of including this waiver in your insurance, and how to get a waiver of subrogation endorsement in your policy.

What is a Waiver of Subrogation endorsement?

The meaning of subrogation:

To understand what a waiver of subrogation is, it’s probably best to start by explaining what subrogation is in the first place. In law, subrogation means the right of one party to substitute the position of another party (“stepping into another person’s shoes”, in layman’s terms).

When it comes to insurance, subrogation is the legal ability for an insurance company to sue another party that caused you to suffer an insurance loss. The insurance company will “step into your shoes”, and then sue the other party to reclaim damages that your insurance company had to pay out.

The meaning of endorsement:

In insurance, an endorsement is simply a modification to your policy. Since insurance policies are legal contracts between your company and the insurer, the insurer cannot simply erase or edit parts of the original contract document. Instead, if changes are made, it will issue another document (the “endorsement”), to state the exact policy changes, and when precisely these changes will take effect.

Subrogation example 1:

For instance, let’s say that while driving, another driver hits your car. Your car is damaged. Your motor insurance company will first compensate you for your loss. Your motor insurance company will then sue the other driver to recoup the claims that they paid to you. Since all drivers must have motor insurance in Singapore, your motor insurance company will likely initiate legal action directly against the other driver’s insurance company.

Subrogation example 2:

Another common scenario where subrogation is commonly carried out is in landlord-tenant relationships. Let’s say that you rent a shop space. The landlord did not carry out proper maintenance of the electrical sockets, causing a fire to break out in the building. The landlord’s premises, and your shop, are destroyed. You file a fire insurance claim with your insurance company for the losses you have sustained. Your insurer compensates you.

Your insurer then assumes your legal persona (i.e. “steps into your shoes”), and sues the landlord for negligence to recoup the claims paid out to you.

The meaning of a waiver of subrogation endorsement:

Now that we’ve established what subrogation means, it’s much easier to understand what a waiver of subrogation means. Since subrogation refers to the right of an insurer to sue another party to recover their losses, a waiver of subrogation simply means that you give up this right to allow your insurance company to sue other parties that caused you to suffer losses.

Let’s look back at our earlier example of the fire in the retail shop (subrogation example 2), to see how a waiver of subrogation endorsement would have affected the outcome scenario. Let’s assume that you had a signed a waiver of subrogation endorsement in your fire insurance policy. This waiver of subrogation endorsement names the landlord, thus waiving your insurer’s right to subrogation against the landlord. Because you had agreed to a waiver of subrogation endorsement in your fire insurance, your insurance company cannot sue the landlord for negligence in causing the fire.

Do Waiver of Subrogation endorsements cost extra money?

Some insurance brokers may charge you a small admin fee to include waivers of subrogation endorsements. Some may even decline to offer this service, as it’s extra work for them. However, Provide offers waivers of subrogation endorsements at no extra charge.

How Waiver of Subrogation endorsements work across various types of insurance

Waivers of subrogation endorsements are often used in commercial property insurance, and public liability insurance.

Waivers in Commercial Property Insurance

Landlords will often request their tenants to carry Commercial Property Insurance (also commonly known as Property All Risks Insurance/Industrial All Risks Insurance). Additionally, landlords will also typically ask their tenants to include a waiver of subrogation endorsement in their Commercial Property Insurance policy. This is meant to protect the landlord against lawsuits from their tenant’s insurance companies. Such protection is most relevant in case the landlord commits acts of negligence that end up damaging their tenant’s property. For instance, let’s say the landlord contracts a plumber to perform regular servicing on the building’s water pipes and bathrooms. The plumber accidentally causes a pipe to burst, causing major flooding throughout the building. This ends up causing severe water damage to the landlord’s building, and also damage to all the property belonging to the tenants in the building. If the tenants did not have a waiver of subrogation endorsement that named their landlord, it is likely that the tentant’s insurers will sue the landlord. The insurers will use this lawsuit to recover the claims they paid out to the tenants.

If you’re a tenant, do consider negotiating with your landlord to include mutual waivers of subrogation endorsements. This protects you against lawsuits from your landlord’s insurance company if you’re found to be negligent in causing property damage.

Waivers in Public Liability Insurance

Waivers of subrogation endorsements are commonly requested in Public Liability Insurance, particularly when you’re working with large companies. This is meant to protect the company from lawsuits from your insurance company, should the other party be found to be negligent.

Common examples where waivers of subrogation endorsements are useful are in cases of personal injury or property damage. For instance, let’s say you take up an engineering project at a shipyard. The shipyard will commonly require you to carry Public Liability Insurance. The shipyard will also commonly require you to include a Waiver of Subrogation endorsement, so that your insurer cannot sue the shipyard owners. If the shipyard owners are negligent (e.g. improper maintenance of cranes at the shipyard causes an accident injuring your employees), then the waiver of subrogation will protect the shipyard from lawsuits filed by your insurers.

What are the main types of Subrogation Waiver endorsements?

There are two types of waiver endorsements used on liability policies: scheduled endorsements, and blanket endorsements.

• A scheduled endorsement will specify a list of names. The insurer will not sue the parties that have been explicitly named in the endorsement, if you have waived your rights of subrogation against them.
• A blanket endorsement does not specify a list of names, and affords broader coverage. Blanket endorsements typically state that if you have agreed in a contract to waive your rights to sue someone, the insurer will not sue them. Blanket endorsements are helpful if you have many clients that require waivers of subrogation. It is much more convenient to have a blanket cover, which saves you from the trouble of having to add a new endorsement each time a client requests for it.

Key takeaways on Waivers of Subrogation:

• A waiver of subrogation prevents an insurance company from suing a 3rd-party to recover claim amounts that they have paid out.
• If you negligently cause a 3rd-party to suffer losses, the 3rd-party’s insurance company can sue you to recover the claims they paid out.
• When entering into a contract, both parties can consider mutually waiving their rights to subrogation. This can be helpful in reducing liability risks, if one party ends up negligently causing losses to the other party. Always consult a legal professional or qualified insurance professional before making any such decisions.

If you run a renovation or construction company, you might have come across two types of liability insurance: Public Liability Insurance, and Contractors All Risk Insurance. Have you wondered what the differences are between Public Liability Insurance vs Contractor All Risk Insurance? You’ve probably encountered contracts that required you to show proof of Public Liability Insurance, and went ahead to purchase that type of coverage. However, did you know that Contractors All Risk Insurance actually includes Public Liability coverage? Furthermore, did you know that Contractors All Risk Insurance is generally a better option for renovation contractors and construction firms? In this guide, we break down a list of specific differences between the two. This will help you better understand which type of insurance is best suited for your needs, and whether you have any potential gaps in your coverage.

Difference 1: Only Contractors All Risk insurance covers damage to contract works due to major risks like fire, explosions, lightning, water damage, and more. Public Liability Insurance does not cover such damage.

This is a major difference between Public Liability Insurance vs Contractor All Risk Insurance. Public Liability Insurance does not cover property under care, custody and control. As such, any damage to your client’s property is not covered. For instance, let’s say a major fire erupts at a building you’re performing renovation or construction works on, and the cause of this fire was not your fault. Since the majority of contracts will only pay you in stages (e.g. 20% down payment, 20% upon Phase 1 completion, and so on), you could be left with losses. Contractors All Risk Insurance would cover the cost of the damage, and therefore help you to recoup the cost of any investments you’ve made into the project.

This is a really important point to consider because contract works are exposed to a significant variety of risks with a razor risks from the weather or from machinery for natural disasters or many other kinds of risks and so it is vital that companies protect the work that they are developing adequately.

Difference 2: Coverage for damage to client’s property due to contractor’s mistakes/negligence

This is another one of the major differences between Public Liability Insurance vs Contractor All Risk insurance. Contractors All Risk Insurance protects you against liability if you negligently damage your client’s property due to your own mistakes. For instance,  let’s say you are working on a renovation project in a client’s house. While performing your renovation works you accidentally damaged your clients ceiling. Your client files a lawsuit against you, demanding compensation for the damage that you caused. Public Liability Insurance would not protect you in this scenario. Since the property was under your care, custody and control (i.e. you were working on it), you would not be covered for the lawsuit. In this scenario, only Contractors All Risk Insurance would cover you. This is a very important point, because many business owners operate under the mistaken assumption that Public Liability insurance covers them against liability for property damage under all circumstances. This is not true.

If you perform any kind of physical work that involves property belonging to someone else, then it is vital that you carry Contractors All Risk Insurance. Public Liability Insurance alone is insufficient. 

Difference 3: Coverage for contractor’s machinery and equipment

Public Liability Insurance only covers your liability to third-parties, and so damage to any equipment and machinery that you use is not covered. Contractors All Risk Insurance, being designed specifically for contracting companies, will cover damage or loss to machinery and equipment that is being used for your contracting work. This is an excellent point of coverage, since contracting machinery and equipment may frequently get damaged while being used for projects. 

Contractors All Risk Insurance also includes coverage for testing machinery and equipment. Before you set out on a project, you may need to conduct tests to ensure that all your equipment is functioning properly. A Contractors All Risk policy would cover any damage to your equipment during testing, and also any potential liability from property damage or injuries during such a period. Coverage for testing is time-limited, and the specific duration depends on your policy. For smaller contractors and construction companies, the testing period cover usually lasts for 2 weeks before the commencement of each project. For larger companies that have more equipment (and also more complex machinery to deploy), the testing period cover can be extended by several weeks to allow adequate pre-construction checks to be performed.

Difference 4: Coverage for hot works/welding

Most standard Public Liability Insurance policies usually carry a hot works/welding exclusion. This means that any liability (e.g. from property damage or injuries) stemming from hot works that you perform will not be covered. Now, hot works are a particularly dangerous activity that have a high chance of causing property damage or injuries to third-parties. If you perform any kind of hot works, this can leave you dangerously exposed to liability. 

Contractors All Risk Insurance, on the other hand, does cover liability arising from hot works. This would protect you in case you cause property damage or injuries while welding. For instance, if one of your employees was performing arc welding, and the sparks burnt a passerby, you can be sued for causing personal injury. A Contractor’s All Risk policy would be activated in such a scenario to pay for lawyer’s fees to defend you, and also to cover any potential settlement costs you might have to bear. 

Difference 5: Coverage for piling and excavations works

Piling and excavation works are particularly dangerous to your client’s property, and to surrounding buildings. Such works have a high chance of causing damage to underground pipes and cables. Piling and excavation may also cause subsidence or the surrounding ground to weaken, which may damage the integrity of nearby structures. If such damage were to occur, the owners of nearby buildings would certainly hold you legally liable for the damage you caused to their structures.

Public Liability Insurance policies typically do not cover piling and excavation works. However, Contractors All Risk Insurance does cover such high-risk work. If you were sued for causing damage to surrounding buildings due to piling and excavation work, Contractors All Risk Insurance would protect you by paying for your defense fees and damages awarded against you.

Difference 6: Coverage for damage to equipment and supplies being shipped to work sites

Contractors All Risk Insurance can be extended to include inland transit and marine cargo coverage. Usually, companies will have to purchase separate insurance policies to specifically cover their equipment, machinery, inventory, and supplies that are being shipped to the work site. For instance, if you are transporting machinery and building supplies from Jurong to Changi for a construction project, you’ll want to have an Inland Transit Insurance policy to cover any potential damage to your machinery and supplies while on the road. (Note: Be aware that a “Property/Industrial All Risks” policy, which covers damage to property/equipment you own, does not cover insured property or equipment when it’s being transported around. It only covers property/equipment kept in the insured premises.). If you’re shipping supplies (e.g. concrete) and equipment (e.g. power tools) into Singapore from overseas, you’ll need to have Marine Cargo Insurance to protect you in case the supplies or equipment get damaged or lost while on their way here.

The great thing about Contractors All Risk Insurance is that if you want to insure equipment and supplies while they’re being transported, you actually don’t need to maintain a separate Inland Transit or Marine Cargo policy. You can simply include Inland Transit and Marine Cargo cover as extensions under your Contractors All Risk policy. Here are some key items that can be insured for loss/damage while being transported, under a Contractors All Risk policy:

• Machinery & Equipment: Excavators, cranes, piling machines, welding tools, power tools, grinders, etc.
• Supplies: Concrete, steel re-bar, H-beams, bricks, wood, steel, stone, etc.

This way, you don’t have to bother with the hassle of multiple policies. Just carry one Contractors All Risk policy, and you’re good to go.

Difference 7: Coverage for architects’, surveyors’ and consulting engineers’ fees 

In the event that you cause property damage, you may need to engage architects, surveyors, and consulting engineers. This is particularly true if the damage that you caused to the building was especially severe. For instance, let’s say that an explosion occurs in a building you’re working on, causing a large portion of the structure you were to collapse. You would need to hire architects, surveyors, and engineers to provide their professional opinion on how best to reconstruct the collapsed portion of the building. You’d need to engage an architect to ensure the reconstructed portion is designed the same way as the rest of the building. You would need a surveyor to ensure , and engineers to ensure that your construction work is mechanically sound. Hiring all these professionals doesn’t come cheap, and could easily set you back tens of thousands (for the smallest of projects) to hundreds of thousands (for larger projects). 

A Contractors All Risk Insurance policy can be structured to include this coverage as an extension of cover. This way, you won’t be caught off guard by having to fork out expensive professional fees in the event that you need to rectify property damage.

Public Liability Insurance vs Contractor All Risk Insurance: which is best for me?

Where can I buy Public Liability Insurance and Contractors All Risk Insurance?

You can buy Public Liability Insurance online here. You can get an online quote within 3 minutes, and can purchase up to $2 million in coverage, which is a high limit. $250,000 Public Liability coverage starts from just $100 a year – highly affordable rates which are specially crafted for SME owners.

You can purchase Contractors All Risk Insurance here. Provide is one of the leading providers of Contractors All Risk Insurance. We’ve survived numerous renovation contractors and construction companies who trust us to protect their business against liability.