What Is a Waiver of Subrogation?

A waiver of subrogation is a contractual provision whereby an insured waives the right of their insurance carrier to seek redress or seek compensation for losses from a negligent third party. Typically, insurers charge an additional fee for a waiver of subrogation endorsement. Many construction contracts and leases include a waiver of subrogation clause.

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 the insured or to a third party to resolve a covered claim.

• A waiver of subrogation prevents an insurer from seeking recovery from a third party for damages paid.
• A waiver of subrogation clause provides additional protection for clients in most industries.
• Waivers of subrogation clauses minimize the potential for lawsuits arising from the loss that may occur during a construction project or other contractual agreement. 
• Insurance companies receive all of the funds that result from a subrogation process.
• Waivers of subrogation can prevent lengthy litigation and ruined business relationships.

Understanding a Waiver of Subrogation

A right of subrogation allows an insurer to stand in proxy for its insured after satisfying a claim paid to the insured per the company’s duties under the insurance policy. The insurance company may pursue a claim against other parties to cover its costs for that same loss, even when the loss involves a resolution of claims brought against the insured.

In other words, if subrogation is waived, the insurance company cannot "step into the client's shoes" once a claim has been settled and sue the other party to recoup their losses. Thus, if subrogation is waived, the insurer is exposed to greater risk.