What Is a “Waiver of Subrogation” in a Construction Contract?
The value of subrogation is an elimination of long-winded litigation procedures and legal expenses. The detriment of subrogation is that it legally prohibits recovering payment from suing a subcontractor or other party who is responsible for the error. Many construction contracts contain a “waiver of subrogation” under the Insurance Requirements section that will impact your project. It is critical to understand each and every clause included in the agreements you sign because a waiver of subrogation is a clause that is frequently included in construction contracts.
Here’s How It Works
A general contractor builds an office building and enters into a subcontract with a subcontractor with a waiver of subrogation. Unfortunately, a few weeks into the project, the subcontractor’s employee unintentionally starts a fire that destroys the property. Who is financially “responsible”? If the contractor had a risk policy that permitted the waiver of subrogation rights, then the contractor is obligated to pay the loss. Is the contractor able to sue the subcontractor to recover the loss? Simply put, no.
Check With Your Team
Whenever a contract requires you to waive subrogation rights, check with your St. Petersburg construction attorney and insurance provider before signing the contract. If you waive an insurer’s subrogation rights, you are not invalidating your own insurance coverage. Waiver of subrogation clauses often requires the insurers’ consent. If the contractor waives the insurer’s subrogation rights, the insurer can deny the claim.
When negotiating their contract, if the parties want the waiver to apply to specific types of losses, modify the standard language with a St. Petersburg construction attorney to make that clear.
Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.