What Is a Waiver of Subrogation?

Definition: Prevents an insurance company from suing the third party that caused the loss.

Usually found in the insurance section, alongside additional-insured and certificate-of-insurance requirements.

Subrogation first, then the waiver

When an insurer pays a claim, it normally acquires the insured's right to pursue whoever caused the loss, so it can recover what it paid out. That is subrogation.

A waiver of subrogation is a promise by the insured not to allow their insurer to do that against a named party — usually the other side of the contract, and frequently that party's affiliates, employees and contractors as well.

The underlying purpose is often entirely legitimate: in a project with an owner, a contractor and several subcontractors, allowing every insurer to sue every other party over the same loss produces circular litigation, raises everyone's premiums, and moves money around without anyone ending up better off. The waiver stops that. It is common in construction and property work, leases, equipment rental, facility and event agreements, and logistics.

The mistake that matters most

Your insurer has to agree.

A waiver you give in a contract that your own policy does not permit can put your cover at risk. Many policies require a waiver to be agreed before the loss, and some require a specific endorsement. Signing a contractual waiver without checking the policy, and without obtaining any endorsement the policy requires, is the single most common error with this clause — and the consequence shows up only after a loss, which is the worst possible moment to discover it.

This is a five-minute question to your broker: does my policy permit a waiver of subrogation in favour of this party, and do I need an endorsement? Ask it before signing.

Where it bites

• It is one-way. You waive; they do not.
• Scope creep. The waiver runs in favour of not just the contracting party but “its affiliates, officers, directors, employees, agents and contractors” — potentially a very large and undefined group.
• It reaches beyond insured loss. A waiver drafted to cover all claims, rather than loss actually covered and paid by the required insurance, is a liability waiver wearing an insurance label.
• Deductibles and retentions. If the waiver covers your deductible or self-insured retention, you absorb that portion of every loss they cause.
• It may cover their wilful misconduct. Read whether there is any exclusion at all.
• The insurance section is usually internally inconsistent. The waiver, the indemnity, the limitation of liability and the required-insurance schedule together decide who actually pays for a given loss — and in many contracts those four clauses do not agree with each other. Reading them as one system is the only way to see the answer.
• Additional-insured wording travels with it. An obligation to name the other party as an additional insured, on a primary and non-contributory basis, changes your policy's economics and can expose your limits to their claims.
• The required limits may exceed what you carry. That makes compliance a purchase decision, not a signature — and an unpriced one if you do not check.

What to negotiate

• Make it mutual and identically scoped.
• Limit it to loss actually covered and paid by the insurance the contract requires — not to uninsured loss, and not to your deductible or retention unless you have decided to accept that.
• Exclude wilful misconduct, and seek to exclude gross negligence.
• Limit the beneficiaries to the contracting entity, rather than an open list of affiliates and agents.
• Add “to the extent permitted by the applicable policies” so a contractual promise cannot silently void your cover — and still obtain the endorsement rather than relying on that wording alone.
• Align the insurance schedule — types of cover, limits, retentions, additional-insured status, primary and non-contributory wording, notice of cancellation — with what you actually carry or can buy, and price the gap.
• Reconcile the four clauses. Decide deliberately which of the waiver, the indemnity and the liability cap governs a loss that all three touch, and make them consistent.
• Require evidence of their cover too, and a reciprocal obligation to maintain it.

What a reasonable version looks like

Mutual; limited to loss covered by the insurance the contract requires; excluding wilful misconduct; scoped to the contracting parties rather than an open list; expressed as effective to the extent the applicable policies permit; supported by an actual endorsement where the policy needs one; with an insurance schedule matched to cover you have confirmed is obtainable, and consistent with the indemnity and liability clauses.

What to push back on hardest

• A one-way waiver.
• A waiver extending to uninsured losses, or to all claims however arising.
• A waiver covering the other party's wilful misconduct.
• A waiver in favour of a long, undefined group of affiliates and agents.
• A waiver combined with an uncapped indemnity from you and a low cap on them.
• Insurance requirements you have not confirmed with your broker.
• Additional-insured and primary and non-contributory wording accepted without checking what it does to your own limits.

Questions worth asking before you sign

• What losses does the waiver cover — only insured loss, or everything?
• Is it mutual?
• Who benefits from it besides you?
• Does my policy permit this, and do I need an endorsement? (Ask the broker, not the counterparty.)
• Does it cover my deductible or self-insured retention?
• Does it cover your wilful misconduct?
• What insurance must I carry, at what limits, and what will that cost?
• How does this interact with the indemnity and the liability cap in this same contract?

Related clauses

• Indemnification clause
• Limitation of liability
• Guaranty clause

Not legal advice. What's My Contract is not a law firm, and this page is general information about how a clause of this type is usually written — not advice about your contract, and not a statement of the law in any particular place. How a clause is read, and whether it can be relied on, depends on where you are, what the rest of the agreement says, and facts a general explainer cannot know. Before you sign, refuse, or act on any clause, have a lawyer licensed in your jurisdiction read your actual document.