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What Do Additional Insured & Waiver of Subrogation Mean?

Atlas Insurance Brokers - Rochester, MN

Adding an additional insured to your insurance policy means expanding coverage to another person or organization. There are many reasons why this may be necessary. One of the most common reasons we see is a subcontractor adding coverage for the general contractor. That way, the general contractor has coverage on the subcontractor’s policy if the general contractor is sued for an issue involving work performed by the subcontractor. This helps protect the general contractor from large liability exposures and helps keep the subcontractor responsible for the quality of their work.

To understand waiver of subrogation, it helps to first define subrogation. When an insurance company makes a payment either to you or on your behalf, they will attempt to recoup money from any other parties responsible for the loss. A common example of subrogation is when you make a claim with your insurance company for damages from a car accident. Your insurance company will pay you for losses and damages and then try to get reimbursed from the other driver, or their insurance company, if they’ve been deemed at least partly responsible. In accepting payment from your insurance company, you transfer your rights of subrogation to them.

A waiver of subrogation means the party listed will not be held liable for damages even if they are partly responsible. This is also commonly seen in a contractor – subcontractor relationship. Consider a project where the general contractor installed insulation incorrectly and an electrical subcontractor installed a receptacle box incorrectly. Alone, neither issue would cause a fire but the two mistakes together caused an electrical fire. In this case, if the general contractor had a waiver of subrogation from the electrical subcontractor, the subcontractor’s insurance would be responsible for the entire loss.

Adding additional insureds and waivers of subrogation increase the amount of risk taken on by the insurance company. For that reason, they may increase the policy premium. Some commercial insurance companies offer a “blanket” endorsement whereby additional insured and waiver of subrogation are automatically included, when required by a job contract. If you expect you’ll need to add several additional insureds or waivers, it’s best to let your insurance professional know right away in order to plan out your best course of action for business insurance.

Disclaimer: The above are merely suggestions and tips, and are not meant to guarantee individual results. Any changes to insurance should be discussed with a licensed professional.