Although the terms subrogation, anti-subrogation and waiver of subrogation share a root word, each is a distinct concept. Understanding the different variations of subrogation can be important for virtually anyone involved in buying insurance or the claims process.

At the heart of the three principles are insurers’ recovery rights. Accordingly, insurance policy wording can be decisive. However, contracts between parties and the law of the jurisdiction can also influence outcomes.

This discussion will examine how these concepts can determine claim outcomes.

Subrogation

Subrogation is often described as the principle which allows the insurer to “stand in the shoes of the insured.”

More precisely, subrogation is the concept whereby an insurer which has paid a claim can seek recovery by pursuing rights which its insured may have against third parties at fault for the loss.

Simple examples of subrogation include where a workers’ compensation, automobile, property or builders risk insurer pays first party benefits to its insured - the injured employee, vehicle owner, building owner or contractor which sustained property damage respectively - and then the insurer brings a subrogation claim to recovery its pay out against the tortfeasor who caused the injury or damage.

Thus, subrogation depends on the transfer of the insured’s rights to the insurer. The authority for this transfer and thus, the insurer’s right to bring a subrogation claim, is typically found in the terms of the insurance policy and is not necessarily limited to no-fault payments under first party policies.

For example, the Insurance Services Office (ISO) CGL common conditions states:

SECTION IV – COMMERCIAL GENERAL LIABILITY CONDITIONS (8) Transfer of Rights of Recovery Against Others to Us – If the insured has rights to recover all or part of any payment we have made under this Coverage Part, those rights are transferred to us. The insured must do nothing after loss to impair them. At our request, the insured will bring “suit” or transfer those rights to us and help us enforce them.

Policies for other lines of coverage can read similarly.

However, the rights of the insurer can be no greater than that of its insured. Accordingly, if the insured has waived its rights against other parties, then the insurer’s right to subrogation will be correspondingly curtailed.

Subrogation can result in an insured getting paid without the time and expense of litigating against the wrongdoer and insurer recovering from the responsible party.

Both the insured and the insurer benefit or, as more lyrically explained by the band U2 in its 1991 hit song One …

One life
But we’re not the same
We get to carry each other
Carry each other
One
One, U2, Achtung Baby (Island Records 1991).

Anti-subrogation

Anti-subrogation is a bit more complicated. In contrast to subrogation, which often involves first party payments, the anti-subrogation rule applies in the context of a lawsuit brought by a plaintiff alleging injury or damage.

In its most simple formulation, anti-subrogation is a rule which bars multiple insureds covered by the same policy for the same risk from asserting common law and contractual claims against each other. The rule prevents an insurer from recovering payments it may make to a plaintiff on behalf of one its insureds from another of its insureds where both are defendants in a suit.

Thus, while anti-subrogation applies to bar cross claims between defendants, the impact of the rule falls squarely on insurers. The rule presents primarily in the context of CGL policies, although it can also arise in automobile or other liability lines of coverage.

There are many permutations to anti-subrogation but some of the more important parameters of the rule are that the bar:

• operates only to the extent of the policy limits;
• will not operate at all where the additional insured is provided coinsurance by another insurer; and
• will not apply where reservations of rights are issued.

Many if not most states have established case law applying the anti-subrogation rule.

Waiver of subrogation

Waiver of subrogation is another distinct concept. Such waivers can appear in documents such as trade contracts, leases and insurance policies. The party’s intent in waiver of subrogation provisions is to bring a measure of finality through insurance. Once the insurer pays, the claim is over.

Contracts

Parties can agree in contracts to waive their rights to make claims against each other to the extent a loss is covered by insurance. Waiver of subrogation language is found in the AIA B141-1997 contract form.

Parties often mislabel contract provisions as waivers of subrogation when the provisions are really claim waivers or waiver of some element of claims such as the common consequential damage waiver.

Because, under subrogation principles the insurer stands in the shoes of its insured, if the insured waives its rights, the insurer similarly has no rights to subrogate or as U2 put it:

You gave me nothing
Now that’s all I got
We’re one but we are not the same
One, U2, Achtung Baby (Island Records 1991).

Insurance policies

Waiver of subrogation language also can appear in endorsements on wrap up insurance programs. An example of ISO wording is the following:

“We (the insurer) waive any rights to subrogate against you (the insured) or against any insured.”
This type of endorsement reflects the intent of the wrap up to provide coverage to, rather than seek recovery from, its insureds.
As the above discussion underscores, mapping subrogation through insurance policies, contracts and the law can be a long and winding road but also an essential part of both proactive risk management planning and post-loss claim adjustment.

Having harmonized subrogation, anti-subrogation and waiver of subrogation, now U2 can take care with the sound advice …It's one love

We get to share it
It leaves you baby
If you don't care for it
One, U2, Achtung Baby (Island Records 1991).