Waiver of Subrogation

Landlords often require their vendors and tenants to carry liability and property insurance to protect them from expensive claims. One important caveat, however, is that these same insurers can turn around and sue the landlord or property manager if a Waiver of Subrogation is not in place.

In order to understand what a Waiver of Subrogation is and why it may be required, we first need to delve into a few key concepts. Let’s break it down!

A. Rights to Recovery

When an accident occurs that causes damage to property or person, you have the right to seek financial compensation from any negligent third party that caused or contributed to the accident. The legal term for this concept is the “rights to recovery.”

B. Transfer of the Rights to Recover

You can also collect funds from your insurance company in this scenario. In doing so, you, the policyholder, give the rights to recovery to your insurance company. This is called “the tranfer of the right of recovery.”

C. Subrogation

When your insurance company has the rights to recovery, it can recover whatever funds it has paid on your claim by suing the insurance company of the negligent third party. This process by which your insurer steps into your shoes and sues on your behalf is called “subrogation.”

Landlords never want their vendors or tenants’ insurers to subrogate them. The monthly premium the landlord must pay to its own insurance company will increase every time a claim is filed. In order to prevent this from happening, the landlord often requires tenants and vendors to make their insurers promise not to subrogate.

The insurer gives up this right through a provision called a Waiver of Subrogation (also known as a Waiver of the Rights to Recovery). A Waiver of Subrogation may be included in the underlying policy, but more often the insurer must amend the underlying policy with an endorsement in order to add a Waiver of Subrogation.

FAQ

Why require a Waiver of Subrogation for Property Insurance if I already have one for General Liability?

A Waiver of Subrogation for Property Insurance would apply in different situations than a Waiver of Subrogation for General Liability, and one cannot be substituted for the other

If the vendor’s tools or equipment are damaged while working on premises, only a Waiver of Subrogation could stop the vendor’s insurer for Property Insurance from suing the landlord’s insurer for General Liability for the landlord’s contributory negligence. In effect, a Waiver of Subrogation on Property Insurance helps protect the landlord from General Liability claims.

As General Liability would not cover damages to the vendor’s own property, a Waiver of Subrogation for General Liability would not be applicable in this situation.

My broker won’t add a Waiver of Subrogation to Property Insurance. What do?

While It is true that there is no such thing as a Waiver of Subrogation endorsement for Property Insurance, many brokers do note a Waiver of Subrogation on certificates of Property Insurance.

If a broker claims they cannot add a Waiver of Subrogation for Property Insurance, Customer Support should ask if they can share with us a snippet of the *Transfer of Rights* provision contained within the Property Insurance policy. Sometimes there’s a waiver clause tacked onto the end of the Transfer of Rights provision that actually satisfies the Waiver of Subrogation requirement. (see underlined below)