Why Might a Waiver of Subrogation Be Disadvantageous for a Company Performing Work for a Client?

Question from WOSman, Why Might a Waiver of Subrogation Be Disadvantageous for a Company Performing Work for a Client?

Answer from AI:

A waiver of subrogation is a contractual provision where one party agrees to limit the rights of their own insurance company in recovering the claim amount paid to the insured. This can be disadvantageous for a company performing work for a client for several reasons.

Increased Insurance Premiums

When a company agrees to a waiver of subrogation, it may increase their insurance premiums. This is because the insurance company cannot recover the claim amount from the party at fault, which increases the risk for the insurer.

Financial Risk

If a loss occurs and the company has agreed to a waiver of subrogation, the company may be financially responsible for the loss. This is because the insurance company may not be able to recover the claim amount from the party at fault.

Legal Implications

In some jurisdictions, waivers of subrogation are not enforceable. This means that even if a company agrees to a waiver of subrogation, it may not be legally binding. This can lead to legal disputes and potential litigation.

Recommendations

Before agreeing to a waiver of subrogation, a company should:

• Consult with a legal professional to understand the implications and potential risks.
• Discuss the waiver with their insurance company to understand how it may affect their premiums or coverage.
• Consider alternative risk management strategies, such as additional insured status or indemnity clauses.

It’s important to note that this information is general in nature and may not apply to specific situations. Always consult with a legal professional for personalized advice. For more information on waivers of subrogation, you can refer to the Insurance Risk Management Institute’s explanation.

Remember: A waiver of subrogation can have significant financial and legal implications for a company. It’s crucial to understand these implications before agreeing to such a waiver.