What Does Waiver of Subrogation Mean?
A waiver of subrogation is the act of waiving or prohibiting an insurance company from recovering losses they incurred on a claim when a third party is found to be negligent. Requiring these types of endorsements are common for many companies who require vendors, supplies or other contractors who perform work on their behalf.
These contracts often prevent the insurance companies from recovering funds from the third party and typically charge higher premiums for a policy with this waiver. While this endorsement is often required and common for vendors or suppliers to add to their Certificate of Insurance, it is important that business owners understand how the waiver affects their insurance coverage.
Insuranceopedia Explains Waiver of Subrogation
While a waiver of subrogation removes an insurance company's right to recover costs or money paid due to a claim, it does not enhance or limit the coverage of either the insured or vendors involved. These endorsements or additions to an insurance policy often come in two different formats:
- A specifically named entity that the insurance company is waiving its right to subrogation against.
- A blanket waiver. For all blanket waivers, permission must be obtained from the insured to subrogate against a third party.
An example of where you commonly see this type of endorsement is when an auto insurer has a contract with a particular driver that has a waiver of subrogation and that driver is in an accident caused by another motorist. The waiver would prevent the car insurer from suing the third party who caused the accident. Or, if it allowed them to sue, it would limit the extent of the suit.