Watch Out for Waiver of Subrogation Rights & Hold Harmless Clauses
We all enter into contracts for phones, builders, and property leasing. Insurers accept Some contract clauses, such as noting the leaseholder as an Interested Party.
However, other clauses restrict insurers' rights, and so the insurer needs to be informed of and agree to the contract clause. Otherwise, they could limit the amount they pay in a claim.
1. Insurers may not provide cover if you agree to the following clauses
Waiver of your Insurers' Subrogation Rights or
‘2. Hold harmless’ other people or companies.
Waiver of Subrogation Rights
Insurers pay claims and then often seek to recover the claim payment from the person/company that caused the loss or damage. All insurance policies include a clause that give the insurer rights to recover the payment on your behalf, this recovery is called Subrogation.
A problem may arise between you and your insurer if you agree not to seek recovery from the person or company that actually caused the loss or damage. It is against the policy conditions to agree to this waiver of rights.
This may result in your insurer paying only part of the claim or, at worst, not paying anything.
Hold Harmless
This type of clause implies that you take on all legal responsibility for another person or company. So, in the event of a loss or claim, you could be responsible for not only your but also their portion of any damages and have to pay their legal costs.
Your insurer charges a premium to cover you and your business. Unless the insurer has also agreed to cover the other person/ company, your insurance policy may only pay part of the claim or, at worst, not pay anything.
Remember
If you agree to Subrogation or Hold Harmless clauses, you could be limiting the amount you can claim under your policy. In some cases, your insurer may not be required to pay the claim.
Please talk to your adviser or give Derek Ford at Insurance Advisernet a ring on 0414 540 767 before you enter into a contract containing these clauses or let them know as soon as you become aware of one of them, so they can be discussed with the insurer.