A waiver of subrogation is a clause you can include in your insurance policy for your clients that gives up your insurance company's right to seek compensation from a third party.
Waiver of Subrogation Definitions and Examples
Waiving your right (or your insurance company's right) to seek a share of damages paid from a third party is known as a waiver of subrogation. While the insurance company faces a risk in this situation, there are good reasons to have this endorsement in place. This waiver can help reduce the number of lawsuits, cross-suits, and countersuits that arise from a single claim when used properly. Note: Rather than being complicated by lawsuits, a waiver of subrogation can help keep working relationships friendly. As a result, it can assist you in avoiding business conflicts while also providing you with peace of mind. A waiver of subrogation is not commonly found in personal insurance policies. It's usually included in professional or commercial policies, as well as some auto and property insurance policies. If you met with a car accident that wasn't your fault, for example, your auto insurance company would use the subrogation process to recover their losses from the at-fault party. However, you may be asked to sign a waiver of subrogation if the at-fault driver wants to settle. This prevents your insurance company from attempting to recover damages on your behalf. You're likely in breach of contract with your insurer if you don't have a waiver of subrogation in your insurance policy and sign one with a third party, which could make you personally liable for claims. Waivers of subrogation may also be found in workers' compensation policies, though some states, such as Kentucky and Missouri, do not allow it.How Does a Subrogation Waiver Work?
A waiver of subrogation prevents your insurance company from seeking a share of the damages from a negligent third party if you sign an insurance policy with one. Let's say you're a contractor who hires subcontractors for various aspects of a construction project. If one of your subcontractors causes damage to your client's property, the damage is covered by their insurance. This subcontractor, on the other hand, was working for you. As a result, the subcontractor's insurance company would typically subrogate your insurance company, as you could be held liable as well. Subrogation is a legal term that refers to your insurance company's ability to file a claim against a third party if they believe the third party is responsible for some of the costs associated with your own claim. The subcontractor's insurance company, in the example above, may seek reimbursement from your insurance company for the damages it has already paid. However, if the subcontractor's insurance policy includes a waiver of subrogation, their insurer will no longer be able to seek compensation from your insurer. Important: Because a waiver of subrogation restricts the options available to insurance companies, including one in your policy may raise your premium.In contracts, there is a waiver of subrogation.
Since it's standard practise for insurance companies to attempt to recover the cost of damages whenever possible, the majority of insurance policies contain a standard subrogation clause. Before signing a waiver of subrogation, talk to your insurance provider. Your insurer might be able to add one to your current policy or assist you in choosing a different plan that does. However, in some contracts, particularly in the construction industry, a waiver of subrogation may be included. You agree that your insurance company will not seek subrogation if you sign a contract that includes this clause.What Does a Subrogation Waiver Mean for You?
When you sign a waiver of subrogation, you're telling your insurance company that you don't want them to try to recover claims from third parties. This endorsement usually raises the cost of your policy because you're putting more risk on the insurance company. A waiver of subrogation, on the other hand, can make business relationships easier, particularly if there is a mutual waiver of subrogation in place. In the event that you are found to be partially at fault for an incident that was covered by another insurer, you won't be subject to cross-suits or other lawsuits if you and your client have this endorsement.Important Points to Remember
- When you sign a waiver of subrogation, your insurer agrees not to pursue damages from a liable third party.
- A waiver can help preserve business relationships or simplify legal matters in the event of an incident.
- A waiver of subrogation usually raises your insurance premiums. However, the added peace of mind may be worth the higher fee.
- Consult with your insurance provider to learn about your options for defence before executing a contract that waives the subrogation clause.
