What is the Waiver of Subrogation Provision?

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 commonly found in construction contracts, because subcontractors and contractors are frequently retained within the construction industry. Still, this is a bit speculative.

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 pursue the negligent third-party.

What is subrogation

Subrogation is defined as one party stepping into the shoes of another party to bring a claim for damages against a third-party. These claims typically occur between an insurance company and their insured. Following a claim, the insured waives their right to subrogation and the insurance company steps into the shoes of the insured to pursue the at-fault third party. Cornell Law School defines subrogation as, “…when one party takes on the legal rights of another, especially substituting one creditor for another. Subrogation can also occur when one party takes over another’s right to sue.”

Contractual relationships

It’s important to note, if a contractual relationship exists between the insured and the at-fault party, the 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 insurers right to bring a claim against the potential at-fault party is destroyed. Be sure to read the waiver of subrogation language carefully. The waiver may not apply to certain situations, damages, or both.

Breach of contract

The same applies for breaches of contracts. It’s best to keep in mind that breach of oral contract complaints must be filed before the four-year statute of limitations. While breach of written contract complaints must be filed before the six-year statute of limitations. Check the contract language to ensure a waiver does not exist before moving forward with your claim.

Consider this scenario

You just got a large property claim in from 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.

So you type a well-written demand letter to the general contractor, but it comes back. The denial letter from the general contractor’s 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.

There are supposed tactics to defeating a waiver of subrogation that include the following:

  1. Anti-subrogation rule;
  2. The insured cannot waive the insurers right to subrogation; 
  3. The reimbursements the insurer is trying to recover are not listed in the contract; 
  4. The waiver is not apparent; and
  5. The damages were caused by a code violation.

Contact one of our lawyers

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 the waiver exists within the contract, your next step should be closing the claim. In doing so, you are not wasting your valuable time and getting your hopes up on a large loss subrogation claim. However if there is a question, you can always contact one of our subrogation lawyers for review. At Keis George, we have the resources to confront complex claims, provide highly personalized attention, and offer a competitive fee structure. You may expect superior case management, information security, and most importantly, increased recoveries. Allow Keis George to redefine what it means to recover your money faster.