Waiver of Subrogation EndorsementWaiver of Subrogation

When going through insurance documents for your home, car, or business, you will come across terms you may not understand. One phrase that often shows up in all types of insurance policies is "waiver of subrogation," which is a legal term you might want to learn more about as there are both downsides and benefits of subrogation clauses.

What is Subrogation in Insurance?
When it comes to insurance, subrogation refers to when an insurance company, after paying for your losses, then inherits the right to recoup the payment for your loss from a third party if the third party was partially responsible for the loss. An insurance company might try to file a subrogation claim to recover their losses from either the individual who caused the casualty or their insurance company.

What is a Waiver of Subrogation?
Waivers of subrogation are provisions in a contract where an insured person waives their insurance carrier's right to seek any compensation for losses from a third party that might be negligent in the case. Often, insurance rates increase if you include a waiver of subrogation endorsement.

In insurance, there are two types of Waiver of Subrogations Endorsements you can add to your policy. They are:

  1. Blanket Waiver of Subrogation
    A blanket waiver of subrogation endorsement often states that if you waive your rights to sue a person, the insurance carrier will not sue that person either. Mutual waivers of subrogation are common among parties who have vested interests in projects. In these cases, both parties agree not to file a claim against the other party's insurance should an accident or other type of incident occur.
  2. Scheduled Waiver of Subrogation
    A scheduled waiver of subrogation endorsement is an add-on to your insurance policy. It states the insurer will not sue any person you list in the endorsement if you waived your subrogation rights against the person you listed.

3 Waiver of Subrogation Examples
In insurance terms, subrogation means that a party has the right to step into the other party's shoes to bring forth an insurance claim for damages. Not every type of claim is eligible for subrogation. The most common type of insurance claim subject to subrogation is property damage on a property insurance policy. Here are three examples of possible subrogation claims:

  1. Car Accident. The amount of money paid in a car accident will significantly depend on the at-fault driver's policy.

    For example, when a drunk driver runs a red light and causes an accident, they will likely be found as the accident's at-fault driver. The at-fault party’s car insurance pays for the other vehicle's damage and other people's medical bills. But, what if the at-fault party’s insurer fails to pay?

    In this case, your insurer can pay your claim and sue the at-fault driver’s insurer through subrogation rights to recover what they paid you, including your deductible.

    This is an example of why not signing a waiver of subrogation is beneficial to you.

    However, in the same scenario, you may want to settle with the at-fault driver’s car insurance company. They might ask you to sign a waiver of subrogation so your insurer cannot sue them. In this case, having a subrogation waiver is beneficial to you.

  2. Home Construction. When you hire a company to perform construction on your property, you expect the company to do the job they agree to in a timeframe that works for both you and the contractor.

    Suppose one of their employees gets hurt while working on your property. In that case, the contractor may hire a personal injury attorney and file a personal injury claim against you, the homeowner.

    In this case, your homeowners insurance policy typically covers these costs up to a certain extent. However, in many contracts with construction companies, the contractor signs a waiver of subrogation as part of the agreement.

    This waiver of subrogation offers protection to the homeowner. It will state that if there is an accident on the property while the work is underway, the contractor's company will not file a personal injury case against you, the homeowner.

  3. Renting Property. If you are a renter, the rental owner probably has a rental insurance policy for their house.

    As a tenant, if you damage the rental home, the landlord's insurer pays for those damages. If the landlord's insurance covers the repair cost, they can file a lawsuit against you, the tenant, to recoup their costs.

    In this example, your landlord did not waive subrogation in your lease or her/his landlord insurance policy. Consequently, you have no protection against being sued by the landlord's insurer.

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What is a Subrogation Claim?
Subrogation claims occur when an insurance company seeks reimbursement for the money they pay on a claim. For example, in arson cases, an insurance company might subrogate a lawsuit against the arsonist to recoup some of the costs. That lawsuit is a subrogation claim against the arsonist.

Do I Have to Respond to a Subrogation Letter?
No. If you receive a subrogation letter in the mail, you are not legally obligated to respond if it is from another person's insurance company. You will not be violating any laws by opening the letter, reading it, and then tossing it in the garbage.

However, be aware that by not responding to this type of letter, you pass up the chance to resolve the issue. If you do not reply, the other party may sue you, and you must go to court and deal with a lawsuit instead.

How to Handle a Subrogation Claim
If you are involved in a subrogation claim, it is a good idea not to ignore any subrogation letters sent to you. Instead, contact the insurance carrier who sent the letter for more information about the lawsuit. Hiring an insurance law firm to help you through the subrogation process is a good idea as insurance companies will have a strong legal team on their side to attempt to recover damages.

Hope that helps, and good luck!

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