Short answer
In Texas, a workers comp waiver of subrogation is added with the Texas Waiver of Our Right to Recover from Others Endorsement, WC 42 03 04. It stops your comp insurer from recovering the benefits it paid for your injured employee from the party named in the endorsement, usually the operator, but only for bodily injury arising out of the operations described and only where a written contract requires the waiver.
- It can be specific (a named party) or blanket (anyone you agreed in writing to give it to). TDI’s manual rule sets a maximum charge: 5 percent of the premium on payroll for work for a named party, or 2 percent of total Texas premium for a blanket waiver.
- In 2018 the Texas Supreme Court held that the waiver also stops the insurer from taking reimbursement out of the injured worker’s recovery from the waived party.
What the endorsement says
Without a waiver, your comp insurer can go after whoever caused your employee's injury. The Texas standard policy gives the insurer your rights "to recover our payments from anyone liable for the injury," and Labor Code Section 417.001(b) says the carrier "is subrogated to the rights of the injured employee." Section 417.002 then requires the net amount an injured worker recovers from a third party to be used first to reimburse the carrier.
WC 42 03 04 gives that up for named parties. The endorsement says the insurer "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."
It adds: "This endorsement shall not operate directly or indirectly to benefit anyone not named in the Schedule." TDI's manual also says only Texas endorsements approved for use in Texas and contained in the Texas manual may be used, so for Texas operations this is the form to look for.
MSA clause to endorsement
Specific or blanket
The schedule on WC 42 03 04 has two boxes, and Rule II, Section G of TDI's Texas basic manual sets the maximum premium charge for each.
| Specific waiver | Blanket waiver | |
|---|---|---|
| Who is protected | The person or organization named in the schedule | "Any person or organization for whom the Named Insured has agreed by written contract to furnish this waiver" |
| Operations | The operations described in the schedule | Manual note: insert "All Texas Operations" |
| Maximum charge under Rule II-G | Five percent of the premium developed on payroll for work performed for the party requiring the waiver | Two percent of the total Texas premium |
| Main risk | Name or operations on the schedule do not match the MSA | No signed written contract requiring the waiver |
The charge is real money
The manual describes these as maximum charges, and the carrier can ask TDI for more in unusual cases. Either way, a waiver changes who absorbs the cost of an injury, so expect it to be priced. Ask your agent which type you have and what it costs.
What the 2018 Texas Supreme Court decision means
In a case decided June 8, 2018 (No. 17-0462), a truck driver was hurt while loading asphalt at a refining company's terminal. The terminal owner had required his employer's comp policy to "contain a waiver of subrogation rights" in its favor, and the policy carried the standard Texas endorsement. The comp insurer conceded it could not recover directly from the terminal owner, but it tried to take reimbursement out of whatever the driver recovered from the terminal owner.
The Court said no. Standing on "over twenty years of unanimous case law" and consistent TDI rulings, it held the carrier "signed away its right to recover benefits it paid to the employee and received a higher premium in exchange for assuming that risk." It "cannot now seek to indirectly recover the same proceeds it agreed not to pursue directly."
For you, the takeaway is that the Texas waiver is a meaningful promise, and insurers price it that way. That is also why they look closely at whether a written contract really requires it.
How it fits the MSA
MSAs built on knock-for-knock indemnity assume each side takes care of its own people. A comp insurer that pays your employee's claim and then sues the operator would undo that. So MSAs commonly require a waiver of subrogation in favor of the operator and its group on your workers comp policy, along with waivers on other lines. Our waiver of subrogation guide covers GL, auto, and umbrella.
Three conditions in the Texas form line up with the MSA:
- A written contract that requires the waiver. An unsigned MSA, or one that is silent on comp, may not satisfy it.
- The named party or blanket wording. On a specific waiver, the operator's legal name has to match. If the MSA extends to the "Company Group," ask whether a specific waiver reaches all of them or whether blanket is the better fit. See what Company Group means.
- The operations described. The waiver applies only to injury arising out of the operations in the schedule.
Common mistakes
- The certificate says "waiver of subrogation applies" but the comp policy has no WC 42 03 04 attached. The certificate does not create it.
- The specific waiver names a parent company, while the MSA is signed by a subsidiary.
- The operations description is narrower than the work you actually do.
- The company is a Texas nonsubscriber. With no comp policy, there is nothing to endorse.
- Out-of-state work is assumed to be covered by the Texas endorsement. Confirm how waivers are handled for each state listed on your policy.
Common questions
Does a Texas waiver of subrogation cost extra?
Usually. TDI’s Texas manual, Rule II Section G, allows a maximum charge of 5 percent of the premium on payroll for work for a named party, or 2 percent of total Texas premium for a blanket waiver.
Can my comp insurer still take money from my injured employee’s lawsuit against the operator?
Not from a recovery against the party covered by the waiver. In No. 17-0462 (2018), the Texas Supreme Court held the standard Texas waiver bars recovery directly from the third party and indirectly from the employee’s recovery from that party.
Is a blanket waiver better than a specific one?
Blanket waivers avoid naming errors for contractors with several operators, but they still require a written contract that asks for the waiver. Specific waivers can be cheaper when only one or two operators require them.
Does the waiver protect the operator from my employee suing it?
No. The waiver stops your comp insurer from recovering from the operator. Your employee’s own right to sue a third party is a separate matter, which the MSA’s indemnity and your liability insurance address.
Sources
- TDI, Texas Workers’ Compensation and Employers’ Liability Manual: Endorsements and Forms. WC 42 03 04 A text, schedule, and notes; only Texas-approved endorsements may be used; Texas standard policy recovery from others.
- TDI, Texas Basic Manual of Rules, Classifications and Experience Rating Plan. Rule II, Section G: waiver description and maximum premium charges.
- Supreme Court of Texas, opinion in No. 17-0462 (June 8, 2018). Standard Texas waiver bars direct and indirect recovery of benefits.
- Texas Labor Code, Chapter 417. Carrier subrogation (417.001(b)) and reimbursement from third-party recoveries (417.002).
This page explains insurance, not law. Have your attorney review indemnity and contract language; our job is making the insurance match it.
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