What Is a Waiver of Subrogation and Why Is It Important for Businesses?
When a contract includes a Waiver of Subrogation, the insurance company agrees not to pursue the other party for reimbursement after paying a covered loss.
7/23/20261 min read
What Is a Waiver of Subrogation and Why Is It Important for Businesses?
In commercial contracts, especially construction projects, lease agreements, and contractor agreements, you may come across a clause called a Waiver of Subrogation. This provision states that after paying a covered claim, the insurance company gives up its right to seek reimbursement from the other party to the contract.
When an insurance company pays a claim and another person or business is responsible for the loss, the insurer generally has the legal right to recover the amount it paid from the responsible party. This legal right is known as subrogation.
How Does a Waiver of Subrogation Work?
When a contract includes a Waiver of Subrogation, the insurance company agrees not to pursue the other party for reimbursement after paying a covered loss. As a result, each party relies on its own insurance coverage, reducing the likelihood of disputes and costly legal claims between the parties. A Waiver of Subrogation is commonly included in:
* Construction projects
* Contractor and subcontractor agreements
* Commercial lease agreements
* Service and maintenance contracts
* Property management agreements
Benefits of a Waiver of Subrogation
* Reduces legal disputes between contracting parties
* Helps preserve long term business relationships
* Speeds up the claims process
* Improves risk management for shared projects
How Is It Different from Additional Insured?
These two terms are often used together, but they have different purposes.
An Additional Insured endorsement extends certain coverage under your insurance policy to another party, as specified by the policy.
A Waiver of Subrogation, on the other hand, simply prevents your insurance company from seeking reimbursement from the other party after paying a covered claim. It does not provide any additional insurance coverage to that party.
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