Subrogation is a transfer of the right to pursue recovery from a third party for damages. In insurance, this right is typically transferred from you to your insurance company by contractual language. If another person causes you injuries, property damage or another type of financial loss, the insurance company may seek recovery from the at-fault party or his insurer. Some insurance policies contain a waiver of subrogation, which may nullify the transfer of recovery rights to the insurance company.
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Standard policy language states that, as part of the contract, you transfer subrogation rights to your insurance company. This means that you cannot bring a civil suit against the at-fault person to receive compensation for your loss above the amount your insurance company has paid you. Accepting the policy and paying premium constitutes acceptance of subrogation. However, a waiver contained in the policy, or in an endorsement attached to the policy, may state that the insurance company does not possess subrogation rights against another person or insurer.
Changes of Subrogation Waiver
If the waiver of subrogation is included in the language of the policy itself, it becomes an unalterable part of your insurance contract. A standard insurance policy is a contract of adhesion, meaning that your insurance company offers the contract on a "take it or leave it" basis. You have no ability to amend the waiver of subrogation, or to reject the waiver while accepting the other terms of the contract. Likewise, an endorsement to a policy becomes a part of the contract. You may reject the endorsement; however, the insurance company can refuse to issue the policy.
A waiver of subrogation allows an insurance company to pay you quickly for your losses. You do not have to wait for the at-fault party or his insurance company to pay you or reimburse the insurance company. After paying for your damages, the insurance company cannot file suit against another party in your name. A waiver of subrogation also saves you legal fees and court costs you would otherwise incur while attempting to recover payment for your losses.
The primary disadvantage of a waiver of subrogation is that your insurance company determines how much you will receive for your losses. If you are not satisfied with the amount, and you cannot negotiate with your insurance company for a larger payment, you lose the right to pursue additional recovery from the at-fault party or her insurance company.
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