A waiver of subrogation is a commonly requested endorsement when it comes to commercial insurance. These waivers can be requested on a variety of policies but are primarily seen on general liability, commercial auto, and worker's compensation.
According to the International Risk Management Institute, Inc.:
- A waiver of subrogation is "an agreement between two parties in which one party agrees to waiver subrogation rights against another in the event of a loss."
Essentially this means the person who adds this endorsement onto their policy is waiving their right to sue the party they added even if that party was negligent.
A common scenario where this waiver is used, is when a subcontractor enters into a contract with a general contractor to work on a specific project. Most general contractors require that the subcontractor provide them with a waiver of subrogation to start the job. This means the general contractor is asking the subcontractor to waive all their rights to sue them regarding the project even if the general contractor is found negligent.
The waivers of subrogation aren't meant to benefit the insured that is adding them to their policy, they are meant to benefit the person who is wanting them added, usually the project owner or general contractor.
Waivers of subrogation are an important part of commercial contracts these days and although they are meant to benefit one party, they are a necessary part of doing business and it's important to educate yourself on what they truly mean and consider why a contractor or project owner may be asking for one. If you are ever unsure about why a waiver of subrogation is needed contact your insurance agent right away to review the situation. It is important to be comfortable with a contract you are entering in to.