A Guide To Waivers of Subrogation

Insurers can be subrogated only to those rights possessed by the insured. In other words, the insurer “steps into the shoes” of its insured in seeking recovery of its payment for a loss. Therefore, any defenses available against the insured would also apply to the insurer in the subrogation action.  

A common defense to a subrogation action is an express “waiver of subrogation” provision contained in a contract between the insured and the allegedly negligent third party. In a waiver of subrogation provision, the parties to a contract agree to waive any rights of recovery against each other to the extent the loss at issue is covered by insurance. The purpose behind waivers of this type is to avoid the hassle of litigation and allocate the risk of loss related to the contract to the insurance carrier. This provision is most commonly used in construction contracts.