What is a subrogation waiver?

The term subrogation waiver (also commonly shortened to “sub waiver” or “waiver of subrogation”) might be something you’ve spotted in your insurance documents but perhaps you aren’t actually sure what it means.

Subrogation is a process that’s designed to get money from the insurance provider for someone responsible for damage. It happens when an insurance provider pays out for damage that their insured party is not responsible for.

So, what is a subrogation waiver?

To put it simply, it’s an agreement that prevents an insurer from trying to get money back that they paid out on a claim caused by a negligent third party.

This means if you suffer a claim where a third party is at fault and your insurance company has provided you with payment for damages by signing the waiver of subrogation, you give up the right for your insurance company to recover money on your behalf from any third party responsible for damages.

How does it work?

As an example, if you’re in a car accident and a third party is at fault, their car insurance company might ask you to sign a waiver of subrogation. This could be because they want to settle a claim with you directly instead of working with your insurance company. 

This usually happens when you don’t submit your own claim, and instead are a claimant on the negligent third party’s claim. Signing a subrogation waiver prevents your insurance company from acting on your behalf with the third-party insurance provider.  

It is important to note that some insurance companies have a waiver of subrogation clause in their terms and conditions that prevents you from entering into such an agreement, so it’s important to speak to your insurer before signing anything. 

Why would an insurer not want a subrogation waiver?

When you’re involved in a car accident for example, the insurer for the person who caused the accident is usually responsible for paying for the damages. However, if you’re not at fault but the other person’s insurance company is slow to accept liability, or if you prefer to deal with your own insurance provider, your insurance company may use something called up-front payment for repairs.This is where your insurer pays the insurance claim, then they will pursue subrogation with the third-party insurance company on your behalf. This would also help reimburse your excess, which you may have paid to start the repairs.

Signing a subrogation waiver removes your insurance company’s right to subrogate and therefore prevents them from recovering any amount that they already paid out to you. Subrogation is good for policyholders because it allows insurers to handle claims when needed, instead of making claimants wait to repair a car or pay out-of-pocket. Insurance companies can do this with confidence, knowing they will have a way to get their money back. Signing a waiver of subrogation would prevent that from happening.

Why would I sign a waiver of subrogation?

You might be asked to sign a waiver if someone else’s insurance company doesn’t want to involve your insurance company in paying out a claim. Most of the time, it’s not in your best interest to agree to this! But if you decide to do so, make sure you notify your insurer and get consent before signing a waiver of subrogation. If you don’t, it may void your insurance contract.

At Howden, your account handler is always on hand to offer advice and answer any questions you may have. It’s our business to protect your business, so get in touch today.

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