A waiver of subrogation is a contractual provision where an insured waives the right of his/her insurance carrier to seek redress, or seek compensation for losses, from a negligent third party. Typically, an additional fee is applied for this special policy endorsement. 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 insurer to stand in proxy for 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 asserts against other parties for that same loss, even when the loss involves resolution of claims brought against the insured. Because waivers of subrogation increase the insurer's risk by prohibiting the recovery of money paid to or on behalf of their insureds, insurance companies frequently charge an additional fee to the premium. Parties to the contract avoid litigation, and the insurance company bears the loss.