What is Waiver of Subrogation?

A policy endorsement that prevents your insurance company from seeking reimbursement from a specified third party after paying your claim, even if that party was responsible for causing the loss.

What You Need to Know

Normally, when your insurer pays your claim, they have subrogation rights—meaning they can sue whoever caused the loss to recover what they paid. A waiver of subrogation eliminates this right for specific parties you designate. The most common scenario is your commercial lease requiring you to waive your insurer’s subrogation rights against your landlord. This means if your landlord’s negligence causes a fire that damages your restaurant, your insurance still pays your claim, but your insurer cannot turn around and sue your landlord to recover the money. The waiver protects your business relationship with the landlord by preventing insurer-landlord lawsuits, but it also means you’ve eliminated one potential source of claim recovery.

Why It Matters for Restaurant Owners

Waivers of subrogation are standard requirements in commercial leases—landlords demand them to protect themselves from tenants’ insurance companies suing them after losses. Most leases are mutual waivers, meaning your landlord also waives their insurer’s subrogation rights against you. The endorsement typically costs little or nothing ($0-$50 annually), so it’s not an expensive requirement. However, understand the implications: you’re giving up your insurer’s ability to recover losses from your landlord. This makes adequate property coverage limits even more critical since you’ve eliminated potential recovery. Always obtain waivers as formal policy endorsements from your insurance company rather than simply agreeing to contractual lease language—insurers may not honor waivers they didn’t explicitly agree to. Request waivers at lease signing, not after you move in, as adding them later may delay lease execution. Waivers typically need to name the specific party (your landlord) and reference the specific property location. When changing insurance companies, ensure waivers carry over to your new policy to maintain lease compliance.

Waiver of Subrogation Checklist

Ensure you're compliant and protected with this step-by-step guide.

📝 Key Actions & Best Practices

Review Your Lease Agreement: Carefully read the insurance section of your commercial lease to identify any requirements for a waiver of subrogation. Landlords almost always require this.
Request the Endorsement Promptly: Ask your insurance agent for a formal Waiver of Subrogation endorsement at the same time you sign your lease. Do not wait until after you've moved in.
Confirm It's a Mutual Waiver: Ensure the lease specifies a mutual waiver, where both you and the landlord waive subrogation rights against each other. This provides reciprocal protection.
Increase Property Coverage Limits: Since you are giving up your insurer's right to recover from the landlord, your own property insurance is your primary financial protection. Ensure your limits are high enough to cover a total loss.

✅ Critical Compliance Steps

Obtain a Formal Endorsement: Do not rely on the language in your lease alone. You must have a specific endorsement from your insurance company added to your policy.
Name the Correct Parties: The endorsement must specifically name the third party (e.g., your landlord's legal business name) and list the correct property address.
Provide Proof to Your Landlord: Once the endorsement is issued, provide a copy to your landlord as proof of compliance with the lease terms.
Carry Over to New Policies: If you switch insurance carriers, you must ensure the Waiver of Subrogation endorsement is included in your new policy. Do not let it lapse.

Critical Action: Always get the waiver as a formal policy endorsement from your insurer. A simple contractual agreement in the lease may not be honored by your insurance company.

Cost Impact: The endorsement is inexpensive, typically costing between $0 and $50 annually. The real financial impact comes from ensuring your own property coverage is adequate, as you are limiting recovery options.