What Is A Waiver Of Subrogation?

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Kyle is the market-facing leader at Founder Shield, with eight years invested in the boutique broker and more than a decade in the insurance industry. Before Founder Shield, Kyle worked at Marsh on the FINPRO team focusing on management liability in the large private and public space. A graduate of Saint Joseph’s University’s Risk Management and Insurance Program, Kyle has focused his entire career helping clients to navigate through an ever changing risk environment.

What Is A Waiver Of Subrogation?

Asked by: Daniel H.

Kyle Jeziorski

A Waiver of Subrogation is an insurance-related term that can often seem complex but can be broken down into simpler components.

Basic Concept:
1. Subrogation is the process by which an insurance company, after paying out a claim to its insured, seeks to recover the amount paid from any third party responsible for the loss. Essentially, it allows an insurer to "step into the shoes" of the insured and pursue recovery from the party at fault.
2. A Waiver of Subrogation is an agreement whereby an insured party agrees to waive the right of their insurance company to seek such recovery. This waiver is usually found in contracts and insurance policies.

Practical Example:Imagine a scenario where a business leases space in a building and accidentally causes damage due to a fire. Normally, if the business' insurance pays for the damage, the insurance company could then pursue recovery from the business itself for negligence. However, if there's a Waiver of Subrogation clause in the lease agreement, the insurance company forfeits this right. Thus, after the insurance pays for the fire damage, it cannot seek to recoup those costs from the business.

Main Purposes:
• Risk Management: Helps manage and allocate risk among parties in contracts, making liability and recovery expectations clear from the outset.
• Relationship Preservation: Prevents insurance companies from suing each other over claims, which can be vital in ongoing business relations and collaborations.In conclusion, a Waiver of Subrogation serves to modify the typical recourse options of an insurer in the interest of maintaining harmony in business relationships and contract agreements, or to fulfill specific requirements of a contract.

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09/12/2024