Waiver of subrogation

Giving up the insurance company’s right to seek compensation for losses.


What is a waiver of subrogation?

A waiver of subrogation is a clause that’s often included in commercial contracts. When we break down this term, we see that:

  • Waiver means to voluntarily give up or ‘waive’ a right.
  • Subrogation refers to the insurer’s legal right to recover money from a third party who may have caused a loss that the insurer had to cover.

So, when you waive your right to subrogation, the insurance company won’t try to get back the money it paid for a claim from a third party who may have caused the loss.

The benefits of including a waiver of subrogation

It’s essential to review contracts and insurance policies carefully to understand whether a waiver of subrogation is in place and its implications for your insurance coverage and legal rights.

  • Widely used: Waivers of subrogation are frequently used in commercial leases and construction contracts.
  • Preserving relationships: This provision can be advantageous for businesses or individuals seeking to maintain good relationships with third parties, such as landlords, contractors, or clients, as it avoids potential legal disputes.
  • Quicker: With waivers of subrogation, things move faster. There is no need for time-consuming negotiation, litigation or claims process.

Waiver of subrogation and insurance contracts

Subrogation helps insurance companies limit their own risk exposure because they may be able to recoup some of their losses. It also benefits policyholders because it keeps costs down. Since insurers can recover some of the money they pay out in claims, they can offer lower premiums.

Additionally, policyholders get money for their claims faster. They receive payment when they file, not after a potentially lengthy legal experience.

However, if a policyholder decides to include a waiver of subrogation in their insurance contract, they should expect to pay a higher premium.

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