Subrogation Waiver
A contractual provision in which one party waives the right to pursue subrogation claims against another party. Common in construction contracts to prevent the property owner's insurer from suing the contractor after paying a claim.
What Is a Subrogation Waiver
A subrogation waiver is a contractual clause in which one party relinquishes the right to have their insurance carrier pursue a third party for reimbursement after the carrier pays a covered claim, and it is a standard provision in construction and restoration contracts designed to prevent circular litigation between project participants. Without a subrogation waiver, the chain of claims can become circular: the owner's carrier pays the claim, then sues the contractor, whose liability carrier pays, then subrogate against their subcontractor, and so on.
How Subrogation Waivers Work in Practice
In a typical construction contract, the property owner and the contractor agree to a mutual waiver of subrogation. This means the owner's insurer cannot sue the contractor (or vice versa) for losses covered by insurance. Each party relies on their own insurance to cover their exposure. The waiver must be in place before the loss occurs to be enforceable. Adding it after a claim is filed does not work.
Relevance to Restoration Contractors
Restoration contractors should understand subrogation waivers because they affect liability exposure. If you sign a contract without a subrogation waiver and cause accidental damage during the restoration work, the homeowner's carrier can pay the claim and then subrogate against you. Your general liability policy handles the defense, but the claim goes on your loss history. A mutual subrogation waiver in the contract prevents this scenario. Review every contract for subrogation language before signing.
Frequently asked questions
A subrogation waiver is an agreement in which one party gives up the right to have their insurance carrier pursue the other party for reimbursement after paying a claim. In construction, the property owner may waive subrogation against the contractor, meaning the owner's insurer cannot sue the contractor to recover claim payments.
Subrogation waivers are common in construction contracts because they prevent circular litigation. Without a waiver, if a contractor accidentally causes damage that the owner's insurance covers, the insurer can turn around and sue the contractor. The waiver streamlines the relationship by keeping insurance claims between the insured and their carrier.
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