What Does Waiver of Subrogation Rights Clause Mean?
A waiver of subrogation rights clause is a clause in an insurance contract that forbids an insurance company from standing in for the insured to sue a third party for damages if the insured files a claim. Waiver of subrogation rights clauses are common in construction contracts, property insurance and lease agreements. Insurance companies tend to dislike waiving their subrogation rights because it increases their exposure to losses.
Insuranceopedia Explains Waiver of Subrogation Rights Clause
Without a waiver of subrogation rights clause, an insurance company can sue a third party for damages if the insured party files a claim. For example, if an auto insurance policyholder has his car destroyed by a third party, the policyholder's insurer may sue that third party after they have settled the claim. This helps the insurance company recoup the cost of paying for the claim. If the right of subrogation is waived, however, the insurance company would not be able to sue this third party and may charge a higher premium for coverage as a result.