By Cary Evans, JD, MPP, CCIC, AIDA™, STS®
Waivers of subrogation remain one of the most frequently misunderstood insurance provisions in client contracts. These clauses prevent an insurer from seeking recovery from a third party after paying a claim.
While commonly required in construction, leasing, and service agreements, these provisions can have unintended consequences:
- Loss of recovery rights: Your insurer may not be able to pursue responsible third parties, increasing your loss experience.
- Coverage implications: Many policies require that waivers be agreed to before a loss occurs and often only when allowed by the policy.
- Premium and retention pressure: Frequent or broad waivers may ultimately impact pricing or terms from insurers.
However, waivers of subrogation can benefit you if you require them in your contracts with others. These clauses minimize lawsuits and help streamline claims handling and resolution.
Best practice:
Ensure your insurance program explicitly supports the use of waivers of subrogation and that such provisions are reviewed in advance. Blanket waivers without alignment to policy language can unintentionally erode protection.