Losses typically happen through someone’s negligence. In general, the negligent party should be liable for such negligence.
Your insurance company could choose to sue a third party to recover the amount of a claim they paid on your behalf if the loss was caused by that third party. This is called subrogation.
Some contractual agreements, including some facility rental agreements, require you to waive your right of subrogation (and therefore your insurance company’s rights) against them in the event of a claim.
While such an endorsement clearly benefits the third party, it is of no benefit to you and only serves to increase the payout of a claim by you – negatively impacting your claims history.
Many, but not all, general liability policies allow you to waive your rights of subrogation as long as it is required by written contract.
When you have negotiating power when drawing up contracts (with sponsors, co-promoters, subcontractors, and perhaps even facilities, etc.) you should try to implement prudent risk management techniques by following these guidelines:
- You should waive your rights of subrogation only to the extent of your available insurance coverage. For example, if you suffer a $2,000,000 loss but your insurance policy provides only $1,000,000 in coverage, you generally want to avoid contract language that could prevent you from seeking recovery from the responsible party for the remaining $1,000,000.
- Waivers should be mutual. If you are waiving your rights of subrogation, the other parties to the contract should waive their rights against you as well. You probably won’t get this with a facility/venue contract. But you should try to get it on every contract you sign.
There is an additional cost to have the endorsement added to your policy.
Also see: Primary & Noncontributory Endorsement
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