A waiver of subrogation is an agreement, backed by a policy endorsement, in which an insured gives up its insurer's right to recover a paid claim from a third party such as a landlord or contractor. Commercial leases usually require mutual waivers so an insured loss stays with the insurer instead of becoming a lawsuit between the parties.
Subrogation is one of the quieter mechanics of insurance. It is what lets an insurer pay its policyholder promptly and then pursue whoever caused the loss. A waiver switches that mechanism off between two named parties. The IRMI definition describes it as a contractual provision in which an insured waives the right of its insurer to recover from a third party.
Where it appears in commercial real estate
Two places. Leases almost always contain a mutual waiver of subrogation for property damage: if the tenant's negligence causes a fire, the landlord's property insurer pays for the building and does not sue the tenant; if the landlord's roof leak ruins the tenant's inventory, the tenant's insurer pays and does not sue the landlord. Vendor contracts add a waiver on the vendor's general liability and workers compensation policies in favour of the owner and manager, so an injured worker's benefits are not recovered from the building.
Why insurers care about it
An insurer prices a policy partly on what it can recover. Waiving that in advance changes the risk, which is why the waiver has to be permitted by the policy, usually through an endorsement. Blanket waiver endorsements, which apply wherever a written contract requires one, are common on commercial general liability and workers compensation policies and are the practical way to satisfy dozens of building contracts without a separate endorsement for each.
What a reviewer checks
| Item | What to look for |
|---|---|
| Lease or contract clause | The waiver is actually required, and is mutual where intended |
| Endorsement or blanket wording | The policy permits the waiver; certificate wording alone is not proof |
| Coverages | Property, general liability, and workers compensation as the clause specifies |
| Parties | Owner, manager, and lender named or captured by the blanket wording |
A waiver of subrogation, additional insured status, and primary and non-contributory wording travel together in most commercial insurance clauses. Each answers a different question: who is covered, whose policy pays first, and who cannot be sued afterward.
Related terms
Frequently asked questions
What is subrogation?
Subrogation is the insurer's right, after paying a claim, to step into the insured's shoes and recover the money from whoever caused the loss. If a tenant's fire damages the building and the landlord's insurer pays, the insurer can sue the tenant. A waiver removes that right in advance.
Why do commercial leases require a mutual waiver of subrogation?
So that each party's property loss is handled by its own insurer without a lawsuit against the other. Landlord and tenant both carry property coverage; the mutual waiver keeps insured losses inside the insurance system and preserves the business relationship.
Does the waiver apply to workers compensation?
It can, by endorsement. A workers compensation waiver prevents the vendor's carrier from suing the building owner to recover benefits paid to an injured worker. Vendor contracts in commercial buildings commonly require it because workers compensation has no additional insured mechanism.
Does a waiver of subrogation need to be on the policy?
Yes. The lease or contract contains the agreement to waive, but many policies only permit a waiver if it is granted before the loss and endorsed on the policy. Reviewers ask for the endorsement, or for policy wording that allows blanket waivers where required by written contract.