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.
Establishing a payment plan with a debtor has several advantages. First, by breaking up a larger payment into smaller installments, it allows the debtor to make more realistic payments and removes the temptation to stop payment because the value of the debt is too high to pay off entirely. Additionally, being able to show that a debtor has may progress in making installment payments toward the full value of the debt can be used as strong evidence in court that the debtor acknowledges the full value of the debt and has promised to pay.
Sometimes an agreement involves cargo or products that, if lost, would create more liability than either party is willing to accept. In these situations, where the risk of loss is disproportionally larger than the contract price, the parties may agree to include an insurance clause to ensure that, if the cargo is lost or destroyed, neither party will have to pay for the damage.
An indemnity clause can be a powerful tool to control costs and manage risk when licensing technology. An indemnity clause, at its most powerful, can completely shield one party from liability, forcing the other party to cover all potential risk stemming from the agreement. However, more commonly, it will be used to cover specific areas of risk such as potential damage caused by use of the licensed technology or claims by 3rd parties for IP infringement.