Subrogation waiver is a clause you can add to your clients’ insurance policy in which the insurance company waives its right to seek recovery of claims from a third party.
Definitions/Examples of Subrogation Waiver
A subrogation waiver means you are waiving your right (or your insurance company’s right) to seek part of the claims paid from a third party. Although this situation poses a risk to the insurance company, there are legitimate reasons for having this support.
When used, this waiver can help reduce the number of lawsuits, cross-claims, and counterclaims that arise from a single incident.
You will typically not find a subrogation waiver in personal insurance policies. It is usually available in professional or commercial insurance documents, as well as some auto and property insurance policies.
For example, if you are involved in a car accident that is not your fault, your insurance company will use the subrogation process to recover its losses from the responsible party. However, if the at-fault driver wishes to settle, you may be asked to sign a subrogation waiver. This prevents your insurance company from acting on your behalf to recover the cost of damages.
If you do not have a subrogation waiver in your insurance policy and you sign one with a third party, you may be violating your contract with your insurance company – which could make you personally liable for claims.
You may also find subrogation waivers in workers’ compensation insurance documents, although some states – including Kentucky and Missouri – do not allow this.
How Does a Subrogation Waiver Work?
If you sign an insurance document with a subrogation waiver, you are preventing your insurance company from seeking any portion of the damages from a negligent third party.
For example, let’s assume you are a contractor who uses subcontractors for various parts of a construction project. If one of the subcontractors does something that causes damage to your client’s property, their insurance company pays the cost of the damage.
However, that subcontractor was working for you. So, usually, the subcontractor’s insurance company would seek subrogation from your insurance company, since you can also be found liable.
Subrogation is a legal term meaning your insurance company can make a claim against a third party if it believes that party is responsible for some costs from your own claim.
In the above example, the subcontractor’s insurance company may approach your insurance company to recover damages it has already paid. But if the subcontractor’s insurance policy includes a subrogation waiver, their insurance company no longer has the right to pursue that recovery from your insurance company.
Since subrogation waivers limit the options available to insurance companies, adding one to your policy can increase your insurance premium.
Subrogation Waiver in Contracts
It is common practice for insurance companies to attempt to recover damage costs whenever possible, so most insurance documents contain a standard subrogation clause.
Talk to your insurance company before signing a subrogation waiver. Your insurance company may be able to add one to your current policy or help you choose a different plan that includes it.
What Does a Subrogation Waiver Mean for You?
A subrogation waiver means that you are asking your insurance company not to attempt to recover claims from a third party. Because you are putting more risk on the insurance company, this support usually increases the cost of your insurance policy.
And with
This can simplify the waiver of subrogation in business relationships, especially if there is mutual waiver of claims in place. If you and your client have this support, you won’t have to worry about getting involved in cross lawsuits or other claims if your liability is found to be partial in an incident covered by another insurance company.
Source: https://www.thebalancemoney.com/what-is-a-waiver-of-subrogation-5198528
Leave a Reply