Commercial property insurance covers the financial loss stemming from the loss or damage of business property. The scope of coverage depends on the terms agreed upon between the policyholder and the insurer. This means every policy is different in that respect. For example, some insurers only cover losses based on a named insured. In other words, such parties exclude loss caused by the actions of a third party. In the latter case, you’d have to pay the responsible party for damages. However, if your commercial property insurance has a waiver of the subrogation clause, you cannot sue the responsible party. Read on to learn more.
What Is a Waiver of Subrogation?
This clause in the commercial property insurance policy bars the policyholder from suing a negligent party in case of property damage. For instance, if your premises fall in a commercial apartment complex, perils destroying other units may extend to your house. If let’s say, your neighbor leaves their faucets open; their house will likely flood. Excess water will also likely flow into your apartment and damage your belongings. Here, you can sue the neighbor or the landlord for compensation. However, if you have a waiver of subrogation on your policy, the insurance company will compensate you and follow up with the negligent company. This means that you have no legal right to sue the negligent neighbor.
Types of Waivers of Subrogation in Commercial Property Insurance
The number of property-related litigations in the U.S. is set to go up by at least 20 percent in the coming months. This is majorly due to inflation, which has increased fraud in the real estate industry. It is crucial to have a waiver of subrogation as part of your commercial property insurance. Types of waivers of subrogation include:
- Mutual Waivers – This waiver bars two parties from suing each other in case of damage to commercial property. Instead, the insurance company compensates for any losses incurred. For instance, a landlord and the property management company can have a mutual agreement (waiver of subrogation) that prohibits them from suing each other.
- Unilateral Waivers -This waiver only prohibits one party from suing the other. For example, a landlord can use this waiver to prevent tenants from suing them. However, the landlord will have the right to sue the tenant in case of damage.
- Permitted Waivers – This type of waiver does not apply in all situations. Instead, the insurance company agrees with the policyholder on which areas of the policy should be waived and for how long. For instance, you can waive your right to sue the other party when you sign the contract, after a loss, or during certain occurrences. The waiver of subrogation typically applies when you’re working with any of the following:
- A party covered under your property insurance
- A party that controls your business
- A party under your control
Get Ultimate Protection for Your Business Property with Pierce Insurance Group
A waiver of subrogation is essential in commercial property insurance, especially if you don’t want the headache of suing people. If you are looking for comprehensive small business insurance in McKinney, including commercial property insurance in Texas, contact us today at Pierce Insurance Group, and we will help you.