Posted on May 17, 2014

When Do You Need A Waiver Of Subrogation?

A waiver of subrogation clause is basically a contract agreement created prior to the beginning of a job and before any sort of claim or loss has occurred. This clause simply states that the insured party gives up any right for his or her insurance company to seek recovery from third parties (clients included) for any type of loss.

Typically, builders use waivers of subrogation when dealing with clients. An example of how a waiver of subrogation works would be when a building contractor, Rick, is awarded a job with the general contractor, Jack, on a project. At the time contract is made, the general contractor Jack requests that the Rick the subcontractor provide a waiver of subrogation from his insurer prior to starting the project. Rick requests the waiver from his carrier, and they agree. So should a claim occur and they will pay it, they also promise to not subrogate or seek recovery of that amount from Jack. It doesn?t matter who was at fault or more responsible for claim, the insurer has promised in advance to not pursue action against the general contractor.

Waivers of subrogation may be requested from many different types of industries. Commercial office buildings may require them prior to entering into a lease with a business tenant. Cities and municipalities sometimes require them prior to awarding projects to service providers.

These waivers may be obtained for various types of commercial insurance including general liability, property and commercial auto coverages. Both parties may contract for mutual waivers or just for the benefit of one.

It is important to understand the potential risks and damages that will be included in the waiver of subrogation as well as which commercial insurance policies allow these for their clients. Insurance agents and carriers may assist in explaining how and when the waivers will apply for each specific insurance policy owned.

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