It is important for you to understand the clauses in an agreement when signing a contract for any professional service. Although this might seem like simple common sense, most people don’t understand clauses in agreements, such as the right of subrogation, subrogation waiver provisions, and so on.
Subrogation, in insurance law, is the insurer’s right on agreeing to payout a claim or to pay a claim and its put in place for the insured to recover paid sums. The insurer has the right to pursue any claim that the insured person is entitled to make against any third party who has caused its loss. In essence, subrogation is in place to prevent an insured person from claiming from a third-party wrongdoer and the insurer, getting overcompensated in the process.
Issues with Subrogation when Drafting Insurance and Liability Clauses
Subrogation issues arise when someone has been injured and another party or person at fault pays for some or all of the damages which result from the injury. By definition, a subrogation claim will allow a collateral source or an innocent paying party to stand for the injured party. When asserting subrogation claims, collateral sources are not entitled to more rights than the individual who was eligible to get the initial benefits.
The issues surrounding subrogation can lead to great difficulties in cases where lawsuit settlement is against a third-party. It is possible for both the collateral source provider and injured party to settle a part of their claims with an at-fault party. The only thing is that such settlements might affect the insured’s right to get ongoing benefits or the insurer’s or insurance broker responsibility to give payments. Quite often, the obligation to payout benefits and the right to get ongoing benefits will depend on if adequate notice is provided to the intended settlement non-settling party.
The parties have to get an express provision within the policy to deny the insurance provider’s rights of subrogation to get rid of the risk that they seeks to impose subrogation rights. A no-subrogation clause along with an exclusion of the underlying contract in the policy would make sure that any liability for that particular risk remains with the insurer.
Bear in mind that these agreements can be single name insurance or co-insurance policies. Even though a contract might provide for one party to procure the insurance, it is important to consider whether it should be a single name insurance plan or two parties in a contract.
Subrogation will matter in cases where you have covered loss, and submit a claim to the insurance provider, but another party is responsible for part or all of the damages.
If you are injured and being bombarded by different parties proclaiming subrogation rights, then you need to consult a lawyer to understand the laws in your state as well as one’s obligations to insure.