Waiver of subrogation

Waiver of subrogation

Managing Director is a fairly common term in many companies and industries. That does not mean that it is necessarily commonly understood however. Here, we look at answering what is a Managing Director and what does a Managing Director do, by providing a Managing Director job description that should cover the commonalities between Managing Directors even in very different sectors.

What is a waiver of subrogation?

In the event that one contractual party’s (A) negligence causes the other party (B) damages covered by party B’s insurance, that insurer may pursue claims against party A. To prevent that from happening contracts have to include a waiver of subrogation clause. Including a waiver of subrogation prevents the insurer from pursuing such claims.


A tenant rents an apartment with a preinstalled kitchen that belongs to the owner and is rented with the apartment. After a pipe bursts the tenant’s private belongings (furniture, electronic devices, etc.) get damaged by the water pouring out. If the tenant has an insurance covering such damages, this insurance will then compensate them for the damages.

After the damages are covered the insurance can pursue the claims against the owner since they are culpable for the preinstalled equipment. In this event the insurance steps into the shoes of its client so to speak. This is called subrogation and gives a client the advantage of not having to wait for any court ruling or settlement in order to recover their losses.

However, a rental contract for an apartment may include a waiver of subrogation clause. As mentioned already this will usually lead to the insurance demanding a higher premium from their client since it puts the insurance at a higher financial risk. In the example with the burst pipe the waiver of subrogation clause prevents the insurance company from recovering any money through pursuing any claims against the owner.

Special considerations

Local legislation in some countries or federal states may overrule any waiver of subrogation clauses. Furthermore, the wording of the waiver of subrogation clause included in any insurance agreement must match the wording of the clause included in the contract which the insurance covers.

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