November 15, 2010

 

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Question:

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Hi Ken,

    I purchased and use your contracts.  I really enjoy your daily emails. I think you perform a very needed service for the alarm industry. I also like the dialog that follows some of these issues.

    Recently, I contracted to install a system with a new builder. He is requiring that I sign his sub contractor contract. Included is his waiver of subrogation clause. I  read in a previous article that "the waiver of subrogation clause is one of the more potent provisions in the alarm contract for your protection."

    What am I giving up by signing this document?  Here is the clause waiving subrogation:  "Waiver of Subrogation. Subcontractor waives all claims and rights of subrogation against XXXXX, ., its agents, officers, directors, and employees for recovery of damages of any kind, including litigation expense and attorneys’ fees for the insurance coverages required."

Greg Smizer

Sprint Security, Inc.

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Answer:

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    You are being asked to waive any right your insurance company might have against the contractor.  The way it plays out is this.  A claim is made against you or a lawsuit commenced and your insurance carrier pays the claim.  It then decides that the contractor is really the one to blame, not you, and it decides to sue the contractor.  Having paid your claim it is subrogated to your rights and can sue the contractor, unless of course you have waived subrogation rights. 

    The contractor could have accomplished the same thing by demanding that you name the contractor as an additional insured.  An insurance company cannot sue its own insured.

    The only issue you need to be concerned about is if your insurance policy prohibits you from waiving subrogation rights as a condition of coverage.  Probably doesn't, but check with your broker and get it in writing. Also, don't ask if he or she likes it, just find out if it voids the policy.