A waiver of subrogation is an endorsement that can be added to a liability insurance policy. The waiver prohibits your (the insured’s) insurance carrier from seeking compensation for losses from a negligent third party.
For example, let’s say you’re an on-demand waiter with general liability insurance. You’re serving at a wedding when you slip, and take a guest down with you. Your general liability insurance would cover their medical bills, as well as the expensive china serving tray you broke – but your insurance carrier may try to recover the costs from the venue, since the wet floors were the reason you fell in the first place. A waiver of subrogation would prevent them from doing this, which is why contracts often include it when you’ll be working on-site.
Waivers of subrogation are common in construction contracts and leases. They can come in the form of a “blanket waiver,” which applies to all parties, or specifically name an entity that the waiver applies to. For example your waiver may only apply to the specific company you’re working for, or a specific venue.
WHAT IS SUBROGATION?
A right of subrogation allows an insurance company to stand in proxy for its insured after they’ve filed a claim so they can receive compensation before the entire case has been resolved. The insurance company may then pursue that claim against other parties for that same loss. This happens most commonly in car accidents. If you’re not at fault, your insurance company will pay out your claim, and then later when the case has been fully resolved, the other driver’s insurance will reimburse them.
Because waivers of subrogation increase the insurance company’s risk by prohibiting the recovery of money paid to or on behalf of their insureds, insurance companies frequently charge an additional fee to the premium. Parties to the contract avoid litigation, and the insurance company bears the loss.
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