"Things I think you might want to know..." -- Art Pape
Two Reasons Not
To Waver on Waivers
Recently I have encountered two interesting aspects of the doctrine of subrogation.
When is a waiver of subrogation of practical use in a CGL Policy?
Section IV (8) of the CGL Policy  provides that “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.” Thus, prior to a loss the insured may waive its right to recover from a third party.
times I have been asked: “When
would someone benefit from a waiver of subrogation in
a CGL Policy?” If another is to benefit from a CGL policy,
it is normally named an additional insured. I was
hard pressed to answer this question until I came across
the following instance: The
CGL Policy consists of a short insuring agreement which
states that the insurer will pay damages that the insured
becomes legally obligated to pay because of bodily injury
or property damage to which the insurance applies. The insuring agreement is followed by
a far longer list of exclusions to which the insurance
does not apply. Exclusion ℓ excludes
coverage for “’property damage’ to ‘your
work’ arising out of it or any part of it and
included in the ‘products completed operations
hazard’.” Thus, if a contractor, which carried the
completed operations hazard (and most do), installs
a defective product, the insurance company provides
neither defense nor coverage for damager arising out
of the product. However,
Exclusion ℓ does not apply if the damaged
work or the work out of which the damage arises was
performed by a subcontractor. Thus, a general contractor's CGL Policy
should defend and pay claims of damages resulting from
defective work if the defective work was performed by
a subcontractor. Virgil Kalchthaler and Morningside Terrace, Inc., 224
After paying the claim, the general contractor's insurer would be subrogated to the general contractor's claim against the subcontractor. In this case, the subcontractor, which would normally not be named an additional insured by the general contractor, would benefit greatly if his subcontract contained a waiver of subrogation by the general contractor. Without the waiver of subrogation the subcontractor could be liable for major league damages. Further, should the subcontractor tender the general contractor’s claim to his liability insurer, that liability insurer would deny the claim based on Exclusion ℓ.
When is a waiver of subrogation effective?
As noted above, the CGL Policy implicitly permits a waiver of the insurer's subrogation rights prior to a loss. The Property Policy  is explicit. Commercial Property [Policy] Condition “I” provides that an insured may “waive its rights against another party in writing prior to a loss.”
In addition, there are three instances in which an insured may waive its rights against another party after a loss. The first instance is in favor of someone insured by the same insurance. This is redundant because insurance rule #1 is that the insurer may not sue its insured. The second instance is where the beneficiary of the waiver is a business firm that the insured owns or controls or that owns or controls the insured.
third instance, which may be of greatest interest to
ACRELians, is where the beneficiary of the waiver is
a tenant of the insured. Thus, even where the tenant’s lease
does not contain a waiver of subrogation, if the tenant
negligently causes damage to the leased premises, the
landlord/insured may waive the insurance company’s
subrogation rights against the tenant, notwithstanding
that the waiver is given after the event which caused
 All references are to CG 00 01 10 01 written by ISO Commercial Risk Services, Inc.
 All references are to CP 90 07 88 written by ISO Commercial Risk Services, Inc.