Waiver of subrogation is one of the most commonly requested — and most commonly missed — endorsements in commercial insurance. It is standard in construction contracts, lease agreements, and vendor contracts. Failing to add it when required by contract creates coverage disputes and E&O exposure for the agent.
Subrogation is the insurer's right to recover money it paid on a claim from the party responsible for the loss. If a contractor damages a tenant's property and the tenant's insurer pays the claim, the tenant's insurer can sue the contractor to recover what it paid. This is subrogation.
A waiver of subrogation endorsement causes the insured's carrier to give up its right to seek recovery from a specified party. If a tenant agrees to waive subrogation in favor of their landlord, the tenant's insurer agrees it will not sue the landlord to recover losses — even if the landlord was responsible for the damage.
Waiver of subrogation is most commonly seen in leases (tenant waives subrogation in favor of landlord) and construction contracts (subcontractor waives subrogation in favor of general contractor).
Most policies require the insured to notify the carrier before agreeing to a waiver of subrogation — because the carrier is giving up a right that belongs to them. Some carriers will not allow certain waivers; others will charge an additional premium. If the insured signs a contract requiring waiver of subrogation without telling the carrier, the waiver may not be enforceable.
Any time a client asks an agent to issue a certificate of insurance that includes "waiver of subrogation," the agent should:
1. Confirm the client has actually signed a contract requiring this 2. Notify the carrier and get the waiver endorsement added to the policy 3. Issue the certificate that reflects the endorsement
Issuing a certificate that shows a waiver of subrogation without the underlying endorsement is a misrepresentation — and a serious E&O exposure.
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