The Insurance Concept You’ll See in Contracts

“Waiver of subrogation” appears in leases, construction contracts, and service agreements. It sounds technical because it is—but it affects your insurance in important ways. Understanding what you’re agreeing to helps you comply with contracts without creating unexpected exposure.

What Is Subrogation?

Subrogation is the insurance company’s right to recover money from parties responsible for a loss after paying a claim. If your insurance pays for damage someone else caused, the insurer can pursue that responsible party to recover their payment.

Example: A delivery driver crashes into your building. Your property insurance pays your claim. Your insurer can then sue the delivery company to recover what they paid you. That recovery process is subrogation.

What Does Waiving It Mean?

A waiver of subrogation means your insurance company gives up the right to pursue recovery from a specific party. You’re promising that your insurer won’t come after that party even if their negligence caused your loss.

Using the same example: If you’ve waived subrogation rights against a tenant and that tenant starts a fire, your property insurance pays your claim but cannot pursue the tenant for recovery.

Why Contracts Require This

Parties request waiver of subrogation to protect themselves from lawsuits. A landlord asks tenants to waive subrogation so the landlord won’t be sued by tenant insurance companies. A general contractor asks subcontractors to waive subrogation so the GC won’t face claims from subcontractor insurers.

It’s essentially a promise that if something goes wrong, you’ll handle it through your own insurance rather than creating a chain of lawsuits.

How to Provide Waiver of Subrogation

Your insurance policy can include a waiver of subrogation endorsement naming specific parties. This formally waives your insurer’s recovery rights against those parties. You need to request this endorsement from your agent—it’s not automatic.

Some policies include blanket waiver of subrogation provisions that apply when required by written contract. Check your policy or ask your agent.

Does It Cost More?

Waiver of subrogation endorsements sometimes carry a small additional premium because the insurer is giving up potential recovery rights. The cost is usually modest compared to the contract value the waiver enables.

When to Be Cautious

Waiving subrogation means accepting that certain losses won’t be recovered from responsible parties. In most commercial relationships, this trade-off is reasonable. But be thoughtful about waiving subrogation broadly or in situations where another party’s negligence is highly likely.