Why Staffing Comp Is Structured the Way It Is

Workers compensation law in most states gives employers a trade. The employer provides benefits without regard to fault, and in exchange the employee generally cannot sue the employer in tort. That protection is often called the exclusive remedy.\n\nStaffing creates a complication, because the worker has two employers in practice. The staffing firm hires, pays, and insures. The client directs the work and controls the site. Many states address this with a borrowed servant, special employer, or dual employment doctrine, under which the client can also be treated as an employer for comp purposes and may share in the exclusive remedy protection. The specifics vary considerably by state and are a legal question for counsel in your jurisdiction, not something to assume from a general rule.\n\nThat ambiguity is why clients ask for endorsements. They want certainty that an injured temporary worker cannot sue them, and they want certainty that your insurer will not come after them for reimbursement. Those are two different protections, and they correspond to the two endorsements.

• Workers compensation generally substitutes no fault benefits for the right to sue the employer
• In staffing, the client may or may not share that protection depending on state law and the facts
• Clients seek endorsements to close that uncertainty
• The legal answer varies by state and should be confirmed with counsel for the states you operate in

The Alternate Employer Endorsement

The alternate employer endorsement extends your workers compensation and employers liability coverage to the client named on the endorsement, for the specific workers you supply to that client.\n\nIn practice it means two things. If the client is named in an employers liability action brought by your temporary worker, your policy provides a defense and indemnity for the client as though the client were an insured. And the client\'s own comp policy is not called upon for that worker.\n\nThat is genuinely valuable to the client, and it has costs to you. Your policy limit is now protecting two parties for the same loss. Your loss experience absorbs a claim that might otherwise have been shared or allocated differently. And defense of the client is paid from your program, which affects your loss ratio and ultimately your experience modification and pricing.\n\nA few practical rules make this manageable. The endorsement should name specific clients, not be a blanket grant to anyone you do business with. It should be limited to the workers you actually supply, not to the client\'s entire workforce. And you should know how many of these you have issued, because a firm with hundreds of alternate employer endorsements has materially expanded who its comp policy protects.

• The endorsement makes the named client an insured for the workers you supply to it
• Your policy limits, defense costs, and loss experience absorb claims involving that client
• Name specific clients rather than granting blanket status
• Keep an inventory of issued endorsements and review it at renewal with your underwriter
• Confirm your carrier will issue it; availability and wording vary

Waiver of Subrogation

Subrogation is your insurer\'s right to step into your shoes and recover from a third party whose negligence caused a loss your policy paid. If a temporary worker is hurt because a client\'s machine was unguarded, your comp carrier pays the benefits and then may seek reimbursement from the client.\n\nA waiver of subrogation gives that right up in advance. Once waived, your insurer cannot pursue the client even if the client\'s negligence caused the injury entirely.\n\nThis is the endorsement staffing firms give away most casually and should think hardest about. It takes a cost that could have been recovered from the party that caused it and leaves it permanently on your loss record. Over a few years, in a client environment with real hazards, that can be a meaningful difference in your experience modification factor and therefore in your premium on every account.\n\nThe counterargument is commercial. Clients require it, competitors agree to it, and refusing can cost you the placement. That is real. The answer is usually not refusal but awareness: price the account knowing you have waived recovery, limit the waiver to the specific client and the specific project or agreement, and resist retroactive or blanket waivers that reach beyond the current relationship.

• A waiver prevents your carrier from recovering from a negligent client
• The cost stays on your loss experience and influences your experience modification factor
• Limit waivers to the named client and the current agreement; avoid blanket or retroactive wording
• Price accounts that require broad waivers accordingly
• Confirm that your policy permits waivers and whether a premium charge applies

Have Your Client Agreements Reviewed

If your client agreements are being signed without an insurance review, that is worth changing before your next audit or renewal. We work with staffing firms on workers compensation, general liability, and contractual review and can read an insurance exhibit with you and tell you what each clause costs. Schedule a conversation at calendly.com/grandbayfinancial.\n\nThis article is for general information and is not a substitute for policy language or professional advice.