Waiver of Subrogation

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.

Key actions and best practices:

• Review your lease agreement carefully to identify any waiver of subrogation requirements — landlords almost always require this
• Request the endorsement promptly from your insurance agent at the same time you sign your lease, not after you've moved in
• Confirm it's a mutual waiver, where both you and the landlord waive subrogation rights against each other
• Increase property coverage limits since you're giving up your insurer's right to recover from the landlord

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.