Subrogation Waiver Clause

Subrogation Waiver Clause

A Subrogation Waiver Clause is a provision commonly included in contracts, particularly in insurance policies and construction agreements, that prevents an insurer from seeking reimbursement from a third party for claims it has paid. This clause effectively waives the insurer’s right to "subrogate," which means to step into the shoes of the insured and pursue recovery from parties that may be liable for a loss.

In practical terms, when a Subrogation Waiver Clause is in place, if an insured party suffers a loss and the insurer compensates them, the insurer cannot later pursue that loss against a negligent third party. This clause is often favored in construction contracts to promote cooperation and reduce disputes between contractors, subcontractors, and property owners, as it fosters a sense of protection among parties against claims that could otherwise disrupt relationships or lead to litigation.

For example, in a commercial construction project, if a subcontractor accidentally damages property, and the property owner has a Subrogation Waiver Clause in their insurance agreement, the insurer cannot go after the subcontractor to recover the costs of the damage. This encourages a collaborative environment where parties can work together without the fear of future claims arising from accidents that may occur during the course of business.