Waiver of subrogation
You just got a large property claim into the Subrogation Department and you are tasked with determining whether or not a subrogation claim exists. It is a large loss. This is good. You’re doing the happy dance into investigation. After your investigation, liability is clear and it points to the general contractor messing up. There is a potential breach of contract and negligence claims. The insured/property owner is negligent free and it looks like a home run.
You type a well-written demand letter to the general contractor, but it comes back. The denial letter from the general contractors insurer. There is a waiver of subrogation clause in the contract between the insured/property owner and the general contractor. Everyone knows the insurer “stands in the shoes” of the insured. Game over. Do not collect $200 as you pass go.
What is a waiver of subrogation
A waiver of subrogation clause is a contractual provision, which prohibits an insurance carrier from recovering monies they paid on a claim due to the negligence of a third party. This occurs when the insurance carrier’s insured waives the right to recover any monies against the other party. A waiver of subrogation is usually contained within construction contracts.
The waiver comes in two forms. The first form is when the insurance company specifically names the entity the insurance company is waiving its’ right to recover against. The second form is a blanket waiver, where the insurance company must obtain permission from their named insured to subrogation against the negligent third-party.
If a contractual relationship exists between the insured and the at-fault party, an adjuster should carefully review the contract to see if there is a waiver of subrogation clause. Under Ohio law, a waiver of subrogation clause is valid. Parties to a contract may modify or extinguish the right to legal subrogation. And since the insurer “stands in the shoes” of the insured, the insurer’s right to bring a claim against the potential at-fault party is destroyed. But be sure to read the waiver language carefully. The waiver may not apply to certain situations, damages, or both.
So what is the lesson? Do work upfront by reviewing the contract to determine if a waiver of subrogation clause is contained in the contract. If it is, closure of the claim is the next step and you are not wasting your valuable time and getting your hopes up on a large subrogation claim. However, if there is a question, you can always contact one of our subrogation lawyers for further review and recommendations.