Waiver of Subrogation
A contract provision in which one party (typically the insured) agrees not to pursue recovery against another party, and requires their insurance carrier to similarly waive the right to subrogate against that party after paying a claim.
A waiver of subrogation is a contract provision that prevents an insurance carrier from pursuing recovery against a specific third party after paying a claim on behalf of its insured. It is a standard risk-allocation tool in construction and restoration contracts.
Why Waivers of Subrogation Exist
Construction projects involve many parties working side by side. Without waivers, a loss caused by one trade could trigger lawsuits between trades, between insurers, and between owners and contractors. Waivers of subrogation channel losses into the insurance program and keep project parties from turning on each other after an incident. They make the jobsite financially workable.
How They Are Structured
The waiver is written into the contract (often the AIA form or a custom construction agreement) and then confirmed on the certificate of insurance. The carrier must agree to the waiver in the underlying policy. Most commercial property and general liability policies include a blanket waiver endorsement, meaning the carrier pre-agrees to honor any waiver the insured signs before a loss.
Practical Implications for Contractors
A contractor who signs a waiver of subrogation gives up the right to be pursued by the other party's insurer for damage to their work. In exchange, the contractor agrees to similarly waive claims against the other party. Both sides look to their own insurance, not to each other. This keeps projects moving and avoids years of litigation over jobsite incidents, but it also means carriers want pricing to reflect the broader exposure.
Frequently asked questions
Subrogation is the right of an insurance carrier to step into the shoes of the insured and pursue recovery from a third party responsible for the loss, after the carrier has paid the claim. If a contractor damages property and the owner's insurer pays, the insurer may then subrogate against the contractor.
Waivers are commonly required by contract to protect trade partners and project participants. A construction owner may require all trades to waive subrogation against each other and against the owner so that losses are resolved within the insurance program rather than through lawsuits between project parties.
Most commercial policies allow pre-loss waivers if the waiver is agreed to in writing before the loss occurs. Post-loss waivers are rarely accepted by carriers. Contractors signing contracts with subrogation waiver requirements should confirm with their broker that the policy accommodates them.
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