Waiver Of Subrogation Rights Clause

What Does Waiver Of Subrogation Rights Clause Mean?

A waiver of subrogation rights clause is a provision in an insurance contract that prohibits the insurance company from stepping in on behalf of the insured to sue a third party for damages when the insured files a claim. Waivers of subrogation rights are commonly found in construction contracts, property insurance policies, and lease agreements. This is why contractors purchasing general liability insurance often have to agree to waive their insurer’s subrogation rights as a condition of signing a project contract. Insurance companies generally dislike waiving their subrogation rights because it increases their exposure to potential 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’s car is destroyed by a third party, the insurer may sue that third party after settling the claim. This allows the insurance company to recover the cost of paying the claim. However, if the right of subrogation is waived, the insurance company would be unable to sue the third party and may charge a higher premium for coverage as a result. Landlords who carry commercial landlord insurance are sometimes asked to waive subrogation against tenants in the lease, which is why many lease agreements include a mutual waiver clause.