What is a Waiver of Subrogation?

If you’ve ever worked as a contractor, rented property, or bought general liability insurance, you may have stumbled upon the term, waiver of subrogation. You might be wondering what subrogation is, why you’re waiving it, and what that means for you. Let’s take a look at these terms and what they mean for you, your business, and/or your insurance.

What is Subrogation?

Subrogation is usually defined as the substitution of one person for another in an insurance claim. Though the concept is a bit abstract, what it does and what it means for you is fairly straightforward. 

Let’s say you get in a car accident where you weren’t at fault. Rather than trying to prove another party was at fault. You decide to save some time and effort, and file a claim with your own insurance. You pay the deductible, get your car fixed or replaced, and move on. Your insurance, however, knows you weren’t at fault. So they file a claim with the at-fault party’s insurance in your name in order to recover the money they paid you.

Filing in your name is a necessary part of this process because the insurance company paid you. They can try to recoup their lost money in your name. In return, they’ll return your deductible if they’re successful.

This is an example of subrogation, and it doesn’t just happen with auto insurance. In fact, it can happen with almost any type of insurance. 

Why Waive Subrogation?

A waiver of subrogation is a fairly common request between employers and contractors, contractors and other contractors, and landlords and tenants. These waivers mean the insurance carrier is agreeing beforehand that if they pay the policyholder for a claim, they won’t try to subrogate to certain specific parties. This applies even if these certain parties are at fault.

In the long run, this can harm smaller parties. Waiving subrogation means there’s no chance of reclaiming your deductible because your carrier won’t have a chance to recoup their loss. It can, however, soothe tensions and lead to more amicable relations. For example, in an agreement between a tenant and landlord, this can prevent any confusion as to who’s responsible for what in the event of a loss.

Conclusion

It’s important to understand exactly how a waiver of subrogation can affect you, which is why you should talk to your independent insurance agent. If you don’t have an independent insurance agent or would like a second opinion, feel free to reach out to us at D&A Insurance!