Defining Subrogation in Commercial Insurance
Subrogation occurs when an insurance company pays for a loss and, after careful investigation, seeks to recoup some or all of the losses paid out. If the claimant or their insurance company is found to be responsible for partial or full liability, the insurance company will attempt to recover those losses.
What Does Waiver of Subrogation Mean?
The term “waive” comes from Middle English, meaning to abandon or relinquish. A Waiver of Subrogation means that your business and the insurance company give up the right to seek reimbursement for losses paid out under a contractual agreement.
Impact of a Waiver of Subrogation
A waiver of subrogation increases an insurance company’s financial exposure because they are forfeiting their right to recover losses from third parties. Due to this increased risk, it is common for insurance carriers to charge a fee for including a waiver of subrogation endorsement in a policy.
Final Thoughts
Understanding the implications of a waiver of subrogation is essential for businesses managing contractual agreements and insurance policies. It is crucial to assess whether this endorsement aligns with your risk management strategy.
For further questions on this or any other risk management topic, please contact us. We look forward to assisting you!
