Little Known Waiver of Subrogation Issues & How to Solve ThemSep 20, 2023
An article by Noelle McCall, CIC, CRM, CISR, Co-founder of Contract Risk Academy
Here are a few top tips ✅ for solving little known Waiver of Subrogation issues in contracts! 💡📃
🔍 Review Waiver of Subrogation Endorsements: Waiver of subrogation is one of the top 3️⃣ most commonly required insurance endorsements in contracts today. The other 2️⃣ are additional insured and primary and non-contributory endorsements.
Did you know? 🤔 Roughly half of all wording on blanket or automatic waiver of subrogation endorsements require insureds to first agree to waive their subrogation rights in a written contract or agreement prior to a covered loss before insured's insurance companies may agree to do the same. This is an issue because if a client waives their subrogation rights in contracts 📃, then the client may give up the right to sue other parties to the contract.
Here are some Pro Tips to address these issues:
✅ Pro Tip! - To address this potential issue in downstream contracts, a best practice is to require the downstream party to the contract to waive their subrogation rights and require their insurance carriers to do the same.
✅ Pro Tip! – To address this potential issue in contracts with upstream parties, all of the insured’s waiver of subrogation endorsements should be reviewed, and if this requirement is included, then request revised endorsement wording as needed to only require the insured’s insurance carriers to waive their subrogation rights if required of insurance carriers in the insured’s contracts.
💥 Remove any wording requiring the insured to waive their subrogation rights before their insurance carriers may agree to do the same. 💥
✅ Pro Tip! - If waiver of subrogation is required, then I'd recommend revising the contract wording to only have the client waive their subrogation rights for amounts covered by required insurance under the contract. If this limitation is not added, then the client may give up their right to sue 👨⚖️ ⚖ 👩⚖️ the other party for 💰 amounts that are not covered by the client's required insurance, such as the amount of their deductibles, self-insured retentions, uninsured losses, amounts excess of insurance limits, and amounts insured under policies that are not required in the contract.
Sample wording may look something like this. "<Client> shall waive its subrogation rights in favor of <other party to contract> with regards to <Client>'s operations under this Agreement with respect to insured amounts under <Client>'s insurance policies required under this agreement."
I recommend the client run any contract changes by their legal team, as I am not a lawyer and am only providing guidance from an insurance and risk-related perspective. 😎 👍
What tips do you have for using Waiver of Subrogation endorsements in contracts?
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