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A waiver of subrogation limits the rights of your insurance company to recoup financial losses from responsible third parties after having paid a claim on your behalf.
If you feel like the insurance world has its own language, fear not: We will help you cut through the confusion. We’ll explain what a waiver of subrogation is and why some vendors and clients may require you to attach one to your Certificate of Insurance (COI).
What is a waiver of subrogation?
“Subrogation” simply means to stand in for another regarding a legal right or a claim. And if you have a waiver of subrogation in your commercial insurance policy, your insurance company cannot “stand in” for you and seek damages from other parties after paying for your claim.
Let’s say you are a wedding planner. The chosen venue may need a waiver of subrogation “on or for their behalf” when the bride and groom sign a contract to rent the space. The venue owners may require a contract from all caterers, photographers, entertainers, or others (like yourself) involved with the big event.
Your policy will need to include the required language, “waiver of subrogation,” on behalf of the venue name and may stipulate a range of dates that waiver is in effect. A waiver of subrogation endorsement typically contains this language.
There are important reasons why you may want to consider adding a waiver of subrogation to your policy, which we will cover below. But first . . .
What is a waiver of subrogation endorsement?
In insurance, an “endorsement” is an addition made to your original policy that somehow changes or adds to the original provisions of the contract. And that’s exactly what a waiver of subrogation is — an endorsement made to your original policy that limits your insurance company’s ability to seek reimbursement from a responsible third party on your behalf.
Because a waiver of subrogation limits your insurance company’s ability to recoup financial losses after they’ve paid a claim, adding this kind of endorsement to your policy may increase your premium.
Are all waivers of subrogation the same?
No, there are two ways that an insurance company can provide a waiver of subrogation endorsement in an insurance contract:
- Scheduled endorsement: The insurance company explicitly names the individual, organization, or company that it waives its right to subrogate. It does this by adding a policy endorsement (an amendment to the existing policy).
- Blanket endorsement: The insurance company sees the blanket waiver as a means to review the contract you’ve signed with the third party and make recommendations for better contractual risk transfer in the future. The blanket waiver of subrogation gives the insured (you) the right to waive subrogation when required by contract — avoiding the hassle of asking for it each time you enter into a contract. In some types of business operations, the blanket waiver of subrogation is commonly requested and reciprocal. You must agree to the subrogation in a contract with the third party, which could be a client or a contractor.
However, it’s essential to remember that you should never sign a contract that includes a waiver of subrogation without first talking to your insurance company.
When do you need a waiver of subrogation?
A waiver of subrogation is most commonly used in commercial insurance policies to simplify the relationship between two parties in a contract and minimize their risk of being involved in lawsuits against each other.
Let’s say, for example, that you’re a contractor with your own business, and you have a client that accounts for more than half of your revenue. After you remodel one of the client’s business properties, they claim the sub-floor installation your employees completed damaged the designer tile the client added on top of it.
The client had to pull up all the tile and redo the floors — so they filed a claim for property damage with their insurance company. Their insurance company pays the claim but can’t subrogate against you. That’s due to the waiver of subrogation endorsement on their policy naming your business (or that specific contract).
Do you need a waiver of subrogation?
Having a waiver of subrogation is like you telling your client, “If you’re somehow at fault or even partially at fault for an injury or damage, I’m not going to come after you, nor is my insurance company.”
Additionally, many vendors or clients might require you to have a waiver of subrogation as part of your insurance policy. They want to know for sure that if they accidentally make a mistake, you’re not going to sue them to recoup costs.
After all, if your insurance company sues one of your clients, it can damage your reputation and inhibit your ability to grow your business.
A waiver of subrogation helps you, too. When your clients, venues, suppliers or subcontractors name your business in a waiver of subrogation endorsement on their policy, their insurance company can’t subrogate against you.
What is a mutual waiver of subrogation?
A mutual waiver of subrogation means that the protection runs both ways. The other party in a contract, such as your client, will not be able to sue you if you’re somehow at fault for an injury or property damage. Likewise, your insurance company cannot sue them if they are partially responsible for an incident your insurance company covered.
With a mutual waiver of subrogation in place, both you and your client can operate with peace of mind knowing that they will not be implicated in cross lawsuits.
Get a waiver of subrogation on your COI
Are you in the market for a general liability insurance policy? Has a client asked that you have a waiver of subrogation in place? Do you need a Certificate of Insurance with one attached to it — like, yesterday?
You’ve come to the right place. Thimble includes a waiver of subrogation on any policy with Additional Insureds. Once you download the Thimble mobile app, enter your details, receive your quote, and make a purchase (in minutes), then you’ll be able to find your waiver of subrogation in the “My Policies” section. From there, change, modify or include Additional Insureds at no additional cost.