Loading the player...

What is a 'Waiver Of Subrogation'

A waiver of subrogation is a contractual provision where one party agrees to limit the rights of its own insurance carrier and usually pays an additional premium for a special policy endorsement allowing for coverage under such a situation. Many construction contracts and leases include waiver of subrogation clauses. Such provisions prevent one party’s insurance carrier from pursuing a claim against the other contractual party in an attempt to recover money paid by the insurance company to its insured or to a third party in resolution of a covered claim.

BREAKING DOWN 'Waiver Of Subrogation'

A right of subrogation allows an insurance carrier to stand in the place of its insured after satisfying a claim paid to or on behalf of the insured in accordance with the company’s duties under the insurance policy. The insurance company may then pursue whatever claim its insured could assert against other parties for that same loss, even when the loss involves resolution of claims brought against the insured. Because they cannot recover the money paid to or on behalf of their insureds when such waivers apply, insurance companies frequently charge an extra premium for an endorsement covering the insured for claims barred by such contractual provisions. Parties to the contract avoid suing each other, and the insurance company bears the loss.

Landlord and Tenant

When a landlord includes such a clause in a lease, the company issuing the tenant’s renter’s insurance policy usually requires an additional premium for coverage of losses paid by the insurer as a result of acts or omissions of the landlord. This is because without the waiver of subrogation clause in the lease, the insurer is able to assert a claim against the landlord for the amount paid to the insured, or on behalf of its insured in resolution of a covered claim.

For example, if the tenant’s guest sustains injuries incurred when a lighting fixture unexpectedly falls from the ceiling of the leased premises, the tenant’s insurance carrier is unable to assert a claim against the landlord for the amount paid in resolution of a claim by the guest against the tenant. Similarly, if the lighting fixture fell on the tenant’s expensive, antique table, the waiver of subrogation prevents the tenant’s insurance company from asserting a claim against the landlord for the amount paid to the insured for the damage to the table. Some leases contain mutual waivers of subrogation, where both the landlord and the tenant waive rights of recovery against each other to the extent that any claimed loss is covered by insurance.

RELATED TERMS
  1. Conventional Subrogation

    The relationship between the insured and insurer as defined in ...
  2. Equitable Subrogation

    A legal doctrine that allows a party that has made payments on ...
  3. Cooperation Clause

    An insurance contract clause that requires the policyholder to ...
  4. Waiver Of Premium For Payer Benefit ...

    A clause in an insurance policy that says that the insurance ...
  5. Insurance Claim

    A formal request to an insurance company asking for a payment ...
  6. As Their Interests May Appear (ATIMA)

    Text in an insurance policy that allows other parties to be added ...
Related Articles
  1. Insurance

    Exploring Advanced Insurance Contract Fundamentals

    Understanding your contract can help you protect our family's financial security.
  2. Insurance

    What Happens If Your Insurance Company Goes Bankrupt?

    When insurance companies go bankrupt or face financial difficulty, it's bad news for policy holders.
  3. Insurance

    Bundle Your Insurance For Big Savings

    Bundling your insurance can save you money and time. Read on to see how get the most out of multiline insurance discounts.
  4. Insurance

    How To Invest In Insurance Companies

    Knowing the special circumstances that insurance companies operate under helps in evaluating whether or not a listed insurance company is a good investment and whether the economic environment ...
  5. Insurance

    The History Of Insurance In America

    Insurance was a latecomer to the American landscape, largely due to the country's unknown risks.
  6. Insurance

    Understanding Insurance Claims

    An insurance claim is a formal request made to an insurance company that asks for a payment based on the terms of the policy.
  7. Insurance

    Introduction to Insurance

    Having the right kind of insurance is a critical component of any good financial plan
  8. Financial Advisor

    Getting Life Insurance in Your 20s Pays Off

    Find out how Americans in their 20s can benefit from a well-thought-out life insurance policy, especially if they are able to build cash value for retirement.
RELATED FAQS
  1. Can you ask your landlord to remove a waiver of subrogation clause from your lease?

    Learn how to remove a waiver of subrogation clause from a lease. Find out also why you might not want to strike this clause ... Read Answer >>
  2. Do contractors require subrogation clauses for their contract workers?

    Discover if general contractors require subrogation clauses when hiring contract workers and what form documents are most ... Read Answer >>
  3. Can your insurance company cancel your policy without notice?

    Learn about your rights as an insured when it comes to your insurance policy being canceled, including how to access your ... Read Answer >>
  4. What are examples of the largest companies in the insurance sector?

    Read about some of the largest and most influential companies in the insurance sector, a list that includes Berkshire Hathaway ... Read Answer >>
  5. What is the usual profit margin for a company in the insurance sector?

    Learn what the average profit margin is within the insurance industry, and what factors can affect the profitability of an ... Read Answer >>
  6. How does the insurance sector work?

    Learn more about the insurance sector, a historically safe place for equity investors and the home of some of the largest ... Read Answer >>
Hot Definitions
  1. Efficiency Ratio

    Ratios that are typically used to analyze how well a company uses its assets and liabilities internally. Efficiency Ratios ...
  2. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  3. Maintenance Margin

    The minimum amount of equity that must be maintained in a margin account. In the context of the NYSE and FINRA, after an ...
  4. Salvage Value

    The estimated value that an asset will realize upon its sale at the end of its useful life. The value is used in accounting ...
  5. Cryptocurrency

    A digital or virtual currency that uses cryptography for security. A cryptocurrency is difficult to counterfeit because of ...
  6. Promissory Note

    A financial instrument that contains a written promise by one party to pay another party a definite sum of money either on ...
Trading Center