Insurance Clauses – Part 1

Insurance is not always at the top of everyone’s priority list. We get it.

We are constantly reviewing the insurance portion of lease agreements, Master Service Agreements, vendor agreements, etc., sometimes after they’ve already been signed and terms agreed to. One clause we see quite often is the Waiver of Subrogation.

It’s important to understand the implications of this clause, ideally before you sign that agreement. In many cases, it may already be included within the wording of your insurance policy. If not, it can sometimes be added by endorsement – but not without us first obtaining approval from your insurer.

Waiver of Subrogation

In a nutshell, adding this clause to your policy means that your insurer will not attempt to subrogate (or, waives their right to subrogate) against the third party in the event of a claim.
You enter into a contract with a distributor, who asks you for a Certificate of Insurance naming them as Additional Insured and including a waiver of subrogation. A claim then occurs (say your company is sued) and you report it to your insurance company. During investigations, the insurer discovers the distributor could be held partially liable. However, the insurer has already waived their rights to subrogate against the distributor, which means they are unable to recover any of the claim costs.

The addition of this clause limits the rights of your insurer. While there are a few insurers that are now including it automatically in their wording, there are others who will add it only for landlords, and still others who will agree to add it only after reviewing the contract in question (and sometimes charging an additional premium). It is best, where possible, to get this removed from the contract you’re signing but if that’s not feasible, contact your broker.