As you look over your business insurance policy documents, you might come across the term ‘waiver of subrogation.’ A subrogation claim is a ‘insurance-y’ term that you may need help to understand. I am hoping to break this term down, so you know what your policy is talking about.
What Is Subrogation?
Subrogation insurance is when your insurance company, after paying a loss, inherits your right to recoup its payment from another party, if that party is also partially responsible for the loss.
Let’s say you are a consultant and you and your client are sued for copyright infringement. The judgement is awarded that requires your insurance company to pay in full to release you from the claim. Having a subrogation clause can help if your client was partially responsible for the loss, and you would have the right to recover part of the loss that was your client’s fault.
When your insurance carrier pays the full amount of a subrogation claim on your behalf, they inherit your right to recover that portion of the loss. Your insurance carrier can seek to recover damages from your client or their insurance company through their right of subrogation.
What Is Waiving Your Rights of Subrogation?
A waiver of subrogation is a provision that states in a contract that gives up this right. When you waive your right of subrogation, your business (and your insurance carrier) is prevented from seeking money of any damages paid. The waiver of subrogation helps eliminate potential conflicts between you and your client.
How Do You Obtain a Waiver of Subrogation?
A waiver of subrogation can be added to your general liability, commercial auto, workers compensation and commercial property policies as an additional premium cost. You will want to factor in any premium increase when determining the price, you charge your clients for the work you do.
There are two types of waiver of subrogation endorsements:
- Scheduled Endorsement: this states that the insurer will not sue the party listed on this endorsement if you waive your rights of subrogation against the client. This endorsement will cost a specific amount for each client or additional insured listed.
- Blanket Endorsement: this is a broader coverage and states that if you have agreed in a contract to waive your rights to sue someone, the insurer will not sue that party. This endorsement will most likely have one cost for as many clients or additional insureds that need be listed.
Choose R.C. Keller & Company
R.C. Keller & Company will work with you to fully understand your needs and the risk that is being undertaken. We are a full-service, independent insurance agency that has been helping the businessowners of Schaumburg and surround areas since 1910. You can send us a request via email or give us a call at 847-907-4520. One of our licensed agents will walk you through the process.