What is a waiver of subrogation?

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When used in the insurance context, subrogation refers to an insurer’s ability to pursue a third party for the payments it made to the insured party.  Naturally, this is beneficial for the insurance company as it is able to recoup its losses.  However, the parties to the agreement may wish to prevent this subrogation for other reasons.

For example, it is not uncommon for a waiver of subrogation clause to be included in a contract between a tenant and landlord.  If a tenant accidentally causes property damage to the apartment, this damage will likely be compensated by the property insurance.  Normally, the insurance company may want to offset its losses by suing the tenant for the damage but the landlord may not want to allow this.  If the tenant has to pay back a large debt to the insurance company, he or she may not be able to pay future rent. Furthermore, having to make these payments to the insurance company may damage the relationship between the tenant and landlord.

Please contact our office if you would like further information regarding waiver of subrogation clauses.