What is a Waiver of Subrogation?

A waiver of subrogation prevents an insurer from seeking payments from third parties that cause losses to the person or business it is insuring.

Waiver of Subrogation Example

For example, let's say ABC Insurance sells a property insurance policy to 123 Shopping Center. Bakery XYZ is a tenant in the 123 Shopping Center.

One day, some bakery employees make a mistake with the ingredients and create an explosion. They cause $40,000 of property damage. 123 Shopping Center files a claim with ABC Insurance to get money for repairs. ABC Insurance writes a check to 123 Shopping Center for $40,000.

Without a waiver of subrogation, ABC Insurance could turn around and sue Bakery XYZ for $40,000 to get its money back. However, a waiver of subrogation will prevent the insurer from doing that.

Why do Waivers of Subrogation matter?

Subrogation means that one party has the right to step into the shoes of another party for the purposes of making claims for damages. Property damage claims are the most common type of subrogated claims. Auto claims and workers compensation claims are often not subrogated. In other words, if someone hits your car and your insurance company has to pay to fix it, it might step into your shoes and go after the person who hit you for the cost of the damage.