What is a Waiver of Subrogation?
Subrogation is an insurance company’s right to recover damages on your behalf from a third-party that was at least partially responsible for a loss.
Subrogation is an insurance company’s right to recover damages on your behalf from a third-party that was at least partially responsible for a loss. If you are uninsured, this would be your legal right, but when an insurance company pays for a claim on your behalf, they usually inherit the right to subrogate per your policy’s terms and conditions.
For example, let’s say you are a construction contractor and you use scaffolding in order to complete your work. One of your workers is on your scaffolding when it collapses and the worker sustains substantial injuries. This results in a workers’ compensation claim which your insurer pays on your behalf. If the claim investigation reveals that the scaffolding subcontractor you hired to set up the scaffolding was at fault, the insurer would have a right to recover some or all of the losses from them.
A waiver of subrogation is you and your insurer waiving the right to recover these damages from a specific third party. As waivers of subrogation increase the risk that the insurer is taking on, they typically come with an additional premium. Using the example above, let’s say the scaffolding subcontractor you used requested a waiver of subrogation from you which you obtained from your insurer. Even if the subcontractor is found to be at fault for the injuries sustained by the worker, the insurer would not be able to recover any damages from them.
A blanket waiver of subrogation is a waiver of subrogation that automatically applies to any party in which you are contractually obligated to obtain a waiver of subrogation for. This is usually the best route for businesses that will require many waivers of subrogation during the course of their policy. Because this waiver of subrogation dramatically increases the risk for the insurer, a blanket waiver of subrogation is typically more expensive than a specific waiver of subrogation.
If you are required to provide a waiver of subrogation, it is best to start by reaching out to your agent or insurance carrier. There may be additional underwriting questions asked for waivers of subrogation. Typically, waivers of subrogation increase your premium so you should be prepared for that as well.
If you have any further questions, it is always best to contact your insurance agent or broker directly. At Oyster, we strive to make insurance accessible. Please contact our experts regarding all of your commercial insurance needs.
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