What is a Waiver of Subrogation?
July 16, 2018
What is subrogation?
Subrogation, in the context of insurance, is when an insurance company, after paying a loss, inherits your rights to recoup its payment from another party (e.g., your client or your landlord) if they are also partially responsible for the loss. An insurance company waives its right to seek subrogation against the third party if you have waived your right to recoup any losses against that other party. The third party may want your policy to cover 100% of a loss for which they may be partially at fault, without having to face the potential of you or your insurance company attempting to recoup some of the loss against them.
For example, suppose you and your client face a common lawsuit for negligence. Part of that claim alleges you were faulty in delivering your services and part of it alleges fault due to your client’s faulty services. A judgment may be awarded that your insurance company pays in full in order to release you from the claim. However, if your client was also partially responsible for the loss, you would have the right to recover the part of the loss that is their fault. But, since your insurance company has paid the full amount on your behalf, they now inherit your right to recover that portion of the loss. The insurance company can in turn seek to recover damages directly from your client or their insurance company.
What does it mean to waive your right of subrogation?
A waiver of subrogation is when the right of subrogation is relinquished. Clients that want your business to waive your rights of subrogation want peace of mind that they will not be held liable for damages if they are somehow partially responsible for a loss.
This waiver of subrogation prevents your business (and your insurance company) from seeking a share of any damages paid, eliminating potential business conflicts between your business and client.
How do I obtain a waiver of subrogation?
A waiver of subrogation request can typically be accommodated on Hiscox policies. Since you are giving up your right to recover any losses, Hiscox now has fewer rights to recover any loss we may pay. This increases our exposure which may lead to a higher premium.
Why choose Hiscox for your waiver of subrogation request?
As part of our underwriting, we will want to make sure we fully understand the additional risk being undertaken. This may lead to questions about the person requesting the waiver, what services you perform, and what the value of those services. It is also a requirement that you must waive your subrogation rights in writing (as part of your client contract) and do so prior to any loss occurring.
If you need a waiver of subrogation on one your Hiscox policies, please contact one of our licensed advisors at 1-866-283-7545.If you are not a current Hiscox policyholder and want to get that Hiscox confidence behind your business, get a fast and free quote online today or call us at 1-866-283-7545 to speak with a licensed Hiscox agent, Monday – Friday, 7am – 10pm ET.
Tell us! Would or have you obtained a waiver of subrogation?
This post was originally published in 2012, and was updated on 7/16/2018 to provide updated internal resources and further additional content regarding the right of subrogation.