[lg policy] Getting Schooled on Texas Subrogation
haroldfs at gmail.com
Tue Jun 19 10:36:35 EDT 2018
*Getting Schooled on Texas Subrogation *
* - 06/18/18- Robert Wilson
I wrote a post last week entitled, “*For Texas Subrogation, the Devil is in
the (Policy) Details
concerned a Texas Supreme Court Decision where an insurance carrier had
attempted to collect from an injured workers' third-party liability suit
despite the existence of a waiver of subrogation in the policy issued to
their insured. The carriers position was that the waiver applied to the
protected business entity, but not to money paid to an injured worker by
that same entity. The court disagreed with their position and ruled against
I questioned the wisdom of such a waiver, and while freely admitting I did
not know much in this arena, suggested that there may be a whole lot of
policy revision in Texas as a result of the decision. It turns out I was
indeed wrong – but not as much as some would like to think.
The morning the article was posted, an attorney friend in Austin texted me.
It essentially said, “Call me, and I'll tell you why the court was right,
and you were wrong.” In that subsequent call, he explained that the waiver
in question has been used for many years and is endorsement language
dictated by the Texas Department of Insurance. Used frequently in
manufacturing, construction and the trades, it reduces liability and is
often required in business contracts between vendors and service
recipients. This raises the employer's workers' comp premiums, which is an
acceptable trade off given the benefits regarding liability.
In my friend's opinion, the carrier in the case I wrote about was “trying
to be cute,” and do an end run around the waiver. He indicated most
watching the case expected the court to rule exactly as they did. The
Supremes supported the status quo; the precedent that had been in place for
at least two decades.
The waiver (WC 42 03 04 A), reads:
*TEXAS WAIVER OF OUR RIGHT TO RECOVER FROM OTHERS ENDORSEMENT *
*This endorsement applies only to the insurance provided by the policy
because Texas is shown in Item 3.A. of the Information Page. *
*We have the right to recover our payments from anyone liable for an injury
covered by this policy. We will not enforce our right against the person or
organization named in the Schedule, but this waiver applies only with
respect to bodily injury arising out of the operations described in the
Schedule where you are required by a written contract to obtain this waiver
from us. *
*This endorsement shall not operate directly or indirectly to benefit
anyone not named in the Schedule. The premium for this endorsement is shown
in the Schedule. *
1. * ( ) Specific Waiver *
*Name of person or organization *
2. *Blanket Waiver *
*Any person or organization for whom the Named Insured has agreed by
written contract to furnish this waiver. *
3. *Operations: *
4. *Premium *
*The premium charge for this endorsement shall be ______ percent of the
premium developed on payroll in connection with work performed for the
above person(s) or organization(s) arising out of the operations described.
1. *Advance Premium *
1. *Use this endorsement to effect a waiver of recovery from others in
accordance with Rule II, Section G, of the Texas Workers' Compensation
2. *If blanket waiver of recover from others is written, the following
wording should be inserted following Operations in schedule: All Texas
The carrier, which we assume was earning additional premium for the waiver,
tried to subrogate their losses in an indirect manner that the courts
determined was in fact a direct attempt, and was not allowed by the policy
So, it appears, despite my normally spot on predictions (which are right,
like almost 50% of the time), that the policy language in the state won't
be changing anytime soon.
Our Austin attorney then pointed me to a more interesting subrogation case
in the state, and suggest I research it a bit. Earlier this year. in *Ins.
Co. of the State of Pennsylvania v. Roberts*, the Texas Supreme Court
declined to review a Court of Appeals decision that allowed subrogation
despite the existence of a waiver.
An *excellent review of that case
is provided by Gary L. Wickert, of Matthiesen, Wickert & Lehrer, S.C.
Essentially, an explosion at an Exxon facility resulted in a subrogation
attempt by AIG, which insured a vendor whose employees were injured in the
event. Initially the action was denied by the trial court, which issued a
summary judgment at Exxon's behest, citing the subrogation waiver in the
vendors policy. The Court of Appeals, however, reversed the decision, based
on the specific language of the contract between the two companies. That
document called for “certain waivers of the insurers' subrogation rights
against Exxon, ‘to the extent liabilities are assumed by'” the vendor.
According to Wickert, AIG claimed “that the subrogation waiver endorsement
was never ‘triggered' because Savage never ‘assumed liability' for Exxon's
negligence.” The court agreed with that position.
Ah, those pesky little contractual details.
Wickert says in his blog that the Supreme Court's decision to let the
Appeals decision stand without review “establishes the Court of Appeal's
decision as good law and will serve as a boon to workers' compensation
subrogation efforts in Texas despite the ubiquitous presence of waiver of
Initially, I had incorrectly speculated that there may be a great deal of
revision in insurance policy language as a result of the Supreme Court
decision discussed in last weeks post. I might have been wrong about the
specific document to be revised, but suspect I was right about those
potential revisions. Vendor services agreements all across the Lone Star
State may get another look due to the ramifications of *Ins. Co. of the
State of Pennsylvania v. Roberts* decision.
And that was the lesson for me in this specific chapter. While it turns out
that in the world of subrogation waivers the devil may not be in the policy
details, he certainly exists in the syntactical world of the standard
Harold F. Schiffman
Professor Emeritus of
Dravidian Linguistics and Culture
Dept. of South Asia Studies
University of Pennsylvania
Philadelphia, PA 19104-6305
Phone: (215) 898-7475
Fax: (215) 573-2138
Email: haroldfs at gmail.com
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