What Is Insurance Waiver of Subrogation?

Found This Helpful

If someone crashes into your car or steps on your computer, you have the right to sue. Subrogation occurs when you hand over your right to sue to your insurer. A waiver of subrogation prevents you from transferring your right. It's a requirement written into some business-to-business contracts.

Why Subrogation

  • Insurance contracts usually give a company the right of subrogation. If someone crashes into your car, for instance, your insurer reimburses you for the damage. The company wants to recompense the amount it paid you; one way to do that is sue the other driver. Although your insurer wasn't a party to the accident, the right of subrogation gives it the legal standing to sue in court. Then it can collect for its losses from the other party or his insurer.

Waiving Rights

  • When two parties sign a commercial contract, the document may have a waiver of subrogation written into its clauses. A company that hires a contractor to repair its offices, for instance, doesn't want legal liability for any accidents, such as someone falling off a ladder. Waiving subrogation prevents the contractor from reassigning her right to sue to her insurer. That way, after the insurer covers the injuries, it can't go to court against the contractor's client.

Side Effects

  • Signing a contract with a subrogation waiver sometimes create legal problems. Insurance contracts can include clauses that mandate a policyholder not do anything to interfere with the insurer's subrogation rights. If the policyholder then signs away his power to subrogate, the insurer can legally declare a breach of the insurance contract. That gives the insurer grounds to refuse to pay for the damages. Hirschler Fleischer recommends anyone asked to sign a waiver discuss it with the insurer first.

Waiver Endorsement

  • One solution for satisfying all parties is a waiver endorsement. This addition to the insurance contract allows the policyholder to sign a waiver of subrogation. In exchange, the policyholder may pay a higher premium to the insurer to compensate the company for its increased risk. Premium charges vary according to the field of insurance and the individual company. Some companies make no extra charge at all. Workers' compensation insurers may charge as much as five percent of the premium.

References

Comments

Resources

  • Photo Credit David De Lossy/Photodisc/Getty Images

You May Also Like

  • What Is Property Subrogation?

    What Is Insurance Waiver of Subrogation? Subrogation & Bankruptcy; Do Waivers of Subrogation Go on General Liability Insurance? Comments. Related Ads. Check...

  • How to Get a Free Waiver Form

    If the waiver does not contain the language you want, select a more effective template. 5. Download the free waiver form. ......

  • Definition of Insurance Subrogation

    What Is Insurance Waiver of Subrogation? Subrogation is a transfer of the right to pursue recovery from a third party for damages....

  • Health Insurance Subrogation

    Subrogation refers to an insurance company´s reimbursement for claims paid out as a result of an accident. In cases of health insurance...

  • Subrogation of PIP Insurance in Texas

    Auto insurance is legally required by every state, although each state sets its own requirements in terms of the type of insurance...

  • Subrogation Process

    Definition of Insurance Subrogation. Health Insurance Subrogation. Featured. 10 Apps for Family Travel by Mom.me. Check It Out. Surviving Europe With a...

  • How to Understand the Acord Certificate of Insurance

    * Whether the policy contains an additional insured endorsement or waiver of subrogation endorsement. ... What Is an Additional Insured on a...

Featured

Read Article

West Elm Hacks to Get the Look for Less