The right of subrogation entitles an insurer to act on behalf of its insured after satisfying a claim paid to the insured in accordance with the insurance company’s responsibilities under the policy.
Even if the loss involves the resolution of claims made against the insured, the insurance company may pursue a claim against other parties to cover its costs for that loss.
In other words, once a claim has been settled, the insurance company cannot “step into the client’s shoes” and sue the other party to recoup their losses if subrogation is waived.
As a result, the insurer is exposed to greater risk if subrogation is waived.
To include a waiver of subrogation clause, insurance companies frequently charge an additional fee in addition to the premium.
The insurance company bears the loss and the contract’s parties avoid legal action.
