What is a waiver of subrogation?

Subrogation is the legal right of an insurance company to pursue a third party that caused a loss to their policyholder, seeking to recover the money the insurer paid on the claim. A waiver of subrogation is an endorsement added to your policy that gives up this right with respect to a specified party. In practical terms, it means that if your insurer pays a claim and the party named in the waiver was partially or wholly responsible, your insurer cannot sue that party to recover its costs.

In the tree service industry, waivers of subrogation are commonly required in contracts with general contractors, property management companies, municipalities, and commercial property owners. The requesting party wants protection from being sued by your insurance company after a loss — even if they were partly at fault. For example, if a property manager directs you to remove a tree and provides inaccurate information about underground utilities, your crew strikes a gas line, and your insurer pays the claim, without a waiver of subrogation your insurer could sue the property manager to recover costs. With the waiver in place, your insurer is barred from pursuing the property manager.

Waivers of subrogation can be added to general liability, workers' compensation, and commercial auto policies. On workers' comp policies, the waiver is particularly common — if your employee is injured at a job site and your workers' comp carrier pays the claim, the waiver prevents your carrier from suing the job site owner or general contractor, even if unsafe site conditions contributed to the injury.

There is a cost to waivers of subrogation, though it is usually modest. Most carriers charge a small additional premium — typically $50 to $250 per endorsement — or include blanket waiver of subrogation provisions at no additional charge. A blanket waiver automatically applies to any party with whom you have a written contract requiring the waiver, which simplifies administration significantly.

From a risk management perspective, granting a waiver of subrogation means your insurance company absorbs costs that might otherwise be recoverable from a negligent third party. This can indirectly affect your loss experience and premiums. However, refusing to provide a commonly requested waiver will cost you contracts, which is a far greater business impact than the marginal premium effect. Work with your broker to ensure your policies include blanket waiver of subrogation provisions so you can comply with contract requirements without delays.