Waiver of Subrogation
A waiver of subrogation is a policy endorsement that prevents the insurer from seeking recovery from a specified third party after paying a claim, even if that party was at fault.
Subrogation is the insurer's right to step into the shoes of the policyholder and pursue recovery from a third party that caused or contributed to a covered loss. For example, if a contractor's negligence causes a fire at an apartment property and the property insurer pays the claim, the insurer can sue the contractor to recover its payout. A waiver of subrogation endorsement eliminates this recovery right against a specific party.
Waivers of subrogation are commonly required in contracts between apartment owners and property managers, contractors, and service providers. These parties want to ensure that if their work leads to a loss, they will not be sued by the property owner's insurance company after the claim is paid. The waiver provides that assurance and is a standard contractual requirement in the apartment management and construction industries.
From the property owner's perspective, granting a waiver of subrogation means the insurer cannot recover from the specified party, which could theoretically affect the owner's loss experience and premiums. However, the practical impact is typically minimal, and the small additional premium for the endorsement is a standard cost of doing business. Waivers of subrogation should be arranged before the need arises, ideally during the initial policy placement, and should be coordinated with the contractual requirements of all parties.