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Subrogation and the Waiver

In our Waiver of Subrogation article featured in INTECH’s Winter Newsletter, subrogation occurs when an insurance company pays a claim and “steps into the shoes” of the insured to make a claim against the third party who may have caused or contributed to the loss, or have responsibility to insure the loss. Conversely, what happens when you are contractually obligated to ‘waive’ subrogation rights against a third party? Are you permitted to waive the Insurers rights? And what are potential impacts to waiving the rights of subrogation?


A blanket waiver of subrogation must be granted under an insurance policy to allow the insured to waive subrogation against a third party, if entered into by contract or agreement, prior to the loss occurring. The intent of the waiver of subrogation is to prevent one party’s insurer from pursuing subrogation against another party. The request to waive subrogation rights is quite common when negotiating lease agreements. It is very important to remember that waiving subrogation can impact your loss experience, which can result in increased insurance premiums, ultimately affecting your company’s balance sheet.

For example, suppose your company owns a single tenant retail building. You have insured the building under a commercial property policy on a replacement cost basis. One evening a fire breaks out and causes significant damage to the interior and exterior of the building. It is determined the fire was caused by a smoldering cigarette the tenant left in the trashcan. Your property insurer will indemnify you for the damage to your building and may try to recover (subrogate) the amount it paid to you by bringing an action against the tenant. If a waiver of subrogation in favor of the tenant was negotiated within the lease terms, the insurer will be unable to pursue the tenant and the $1M loss would remain on your claims experience and impact future premiums.

Subrogation and the right to waive subrogation are just two of the countless insurance concepts that can impact a company. We suggest you contact an experienced risk and insurance consultant at INTECH Risk Management to walk you through the various mechanisms within contracts and insurance policies to ensure you are adequately aware of all contractual risks and insurance obligations.


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Senior Manager, Risk & Insurance Services






INTECH Risk Management (“INTECH”) is an independent insurance consulting company involved in the analysis, design, development, implementation and management of insurance programs. INTECH does not sell insurance, nor is it affiliated with any insurance company or brokerage.  This unique independent position in the marketplace enables our consultants to avoid conflicts of interest and provide our clients with unbiased, expert advice. INTECH has been the 2015 and 2016 winning recipient of the IJGlobal Americas Due Diligence Provider of the Year Award.

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