Contract Clauses
Jump to Section
Subrogation Clause Defined
Subrogation clauses are used in the real estate industry and insurance industry and allows insurance companies to follow a lawful claim against a third party that caused damages to the insured. They fall under the common law legal system if a dispute over indemnity or enforceability occurs. The insurance company is the principal, and the third party is the surety.
Here’s an informative article about subrogation clauses.
Subrogation Clause Explained
Subrogation clauses allow insurance companies to pay their insured’s losses while going after a third party for payment or reimbursement. They help prevent “bottlenecks” in getting customers the benefits they need promptly. In general, subrogation clauses make the most sense for use in insurance contracts.
Here’s another article about subrogation for more information.
Purpose of Subrogation Clause
The purpose of subrogation clauses is to shift liability from one party to another when paying insurance claims. They often describe the insurance company’s subrogation rights and responsibilities throughout the duration of the agreement. While subrogation clauses often vary according to the unique situation, they all serve the same purpose in general.
This article also discusses the characteristics of subrogation clauses.
Subrogation Clause Examples
Examples of subrogation clauses include:
- Example 1. Filing an auto insurance claim against a third party driver
- Example 2. Trustee lenders subrogating trustee’s indemnity rights
- Example 3. Health insurance companies pursuing claims for third-party services
Subrogation Clause Samples
SUBROGATION
a) Except as provided in Section 8(d), the Insureds shall preserve any indemnification or other rights against any other person or entity for any Loss and preserve the Insurer’s subrogation rights with respect thereto.
b) In the event of any payment by the Insurer in connection with this Policy, the Insurer shall be subrogated to, and the Insureds shall assign to the Insurer, all of the Insureds’ respective rights of recovery against any person or entity (other than the acquired business) based upon, arising out of or relating to such payment. If the Insureds are unable to assign such rights to the Insurer, or if the Insurer desires, then, instead of assigning such rights to the Insurer, the Insureds shall allow the Insurer to bring suit in their name. The Insureds shall, and to the extent possible shall cause their respective Affiliates to, execute all papers required and take all steps reasonable, necessary or advisable to secure and further such subrogation and assignment rights. In no event shall the Insureds or their respective Affiliates waive any rights that could adversely affect any such subrogation or assignment rights. Any amounts recovered by the Insurer in connection with the exercise of its subrogation or assignment rights shall be applied first to reimburse the Insurer for any Loss paid by the Insurer pursuant to this Policy and for any costs or expenses incurred in connection with such recovery and then the remainder of such recovered amounts shall be paid to the Insureds.
c) In the event of any payment by the Insurer in connection with this Policy, the Insurer shall be subrogated to, and the Insureds shall assign to the Insurer, all of the Insureds’ respective rights of recovery against any person or entity (other than the acquired business) based upon, arising out of or relating to such payment. If the Insureds are unable to assign such rights to the Insurer, or if the Insurer desires, then, instead of assigning such rights to the Insurer, the Insureds shall allow the Insurer to bring suit in their name. The Insureds shall, and to the extent possible shall cause their respective Affiliates to, execute all papers required and take all steps reasonable, necessary or advisable to secure and further such subrogation and assignment rights. In no event shall the Insureds or their respective Affiliates waive any rights that could adversely affect any such subrogation or assignment rights. Any amounts recovered by the Insurer in connection with the exercise of its subrogation or assignment rights shall be applied first to reimburse the Insurer for any Loss paid by the Insurer pursuant to this Policy and for any costs or expenses incurred in connection with such recovery and then the remainder of such recovered amounts shall be paid to the Insureds.
d) Notwithstanding the foregoing or any other provision of this Policy, the Insurer hereby waives any subrogation rights it may have against the Seller Parties or any of their Affiliates and shall not otherwise be entitled to other forms of recovery including through claims of indemnity, re compensation, offset, contribution or otherwise, except to the extent such payment made by the Insurer under this Policy was based upon or arose out of fraud by the Seller Parties. The foregoing sentence in Section 8(d) shall not limit the right of the Insurer to bring a direct action against any Insured in connection with the enforcement of the terms of this Policy. The Seller Parties and their respective Affiliates shall be express third party beneficiaries of this Section 8(d) and shall be entitled to enforce this Section 8(d) as if they were a party hereto. This Section 8(d) may not be amended without the consent of the Seller Parties, who have relied on this Section 8(d) in entering into the Acquisition Agreement.
Reference:
Security Exchange Commission - Edgar Database, EX-2.1 2 d27355dex21.htm EX-2.1, Viewed May 10, 2021, < https://www.sec.gov/Archives/edgar/data/1460329/000119312515381496/d27355dex21.htm >.
Common Contracts with Subrogation Clauses
Common contracts with subrogation clauses include:
- Insurance contracts
- Residential real estate contracts
- Commercial real estate contracts
- Health insurance contracts
- Auto insurance contracts
- Workers’ compensation policies
- Commercial motor vehicle policies
- General liability insurance
- Professional liability insurance
- Renter’s insurance
- Pet insurance
If your business uses subrogation as part of its regular business practice, you should ensure that your contracts contain well-crafted subrogation clauses to protect your rights.
Subrogation Clause FAQs
Subrogation clauses are complicated. Consider the following subrogation clause FAQs below for more information:
What is a waiver of subrogation clause?
A waiver of subrogation clause prevents the insurance company from pursuing a claim against a third-party individual or entity. They are most valuable when the principal requires surety endorsement to avoid job site liability claims.
If you need advice about subrogation clauses, speak with a legal professional in your state. Insurance lawyers and real estate lawyers are best-suited to answer your questions depending upon the facts and circumstances of your situation.
Meet some of our Lawyers
Rhea d.
Rhea de Aenlle is a business-savvy attorney with extensive experience in Privacy & Data Security (CIPP/US, CIPP/E), GDPR, CCPA, HIPAA, FERPA, Intellectual Property, and Commercial Contracts. She has over 25 years of legal experience as an in-house counsel, AM Law 100 firm associate, and a solo practice attorney. Rhea works with start-up and midsize technology companies.
Michael S.
I began my career at "big law" firms, worked in-house for 14 years, and now have my own practice, providing big law quality at small firm rates. My practice focuses on strategic and commercial transactions, including M&A, preferred stock and common stock offerings, asset purchases and sales, joint ventures and strategic partnerships, stock option plans, master services agreements and SOWs, software development and license agreements, SaaS agreements, NDAs, employment and consulting agreements. I also manage corporate governance, advise boards and executives, and act as outside general counsel. I represent clients across the country and around the world.
April 9, 2023
Benjamin S.
Benjamin Snipes (JD/MBA/LLM) has 20 years of experience advising clients and drafting contracts in business and commercial matters.
April 14, 2023
Sonya A.
Experienced Attorney with a demonstrated history of working in the law practice industry. Skilled in Preparation of Wills, Trial Practice, Estate Administration, Trusts, and Estate Planning. Strong legal professional with a Juris Doctorate focused in Law from Howard University School of Law.
April 14, 2023
Karen M.
Karen V. Mills is the founding member of the woman-owned boutique law firm Mills Law, LLC, based in Atlanta, Georgia, specializing in contracts, corporate transactional and business law.
April 17, 2023
Andrew M.
Business Venture Law: Andrew Moore, Esq. focuses on solving modern business problems with common sense at affordable rates.
Find the best lawyer for your project
Browse Lawyers NowCONTRACT lawyers by city
- Atlanta Contract Lawyers
- Austin Contract Lawyers
- Boston Contract Lawyers
- Chicago Contract Lawyers
- Dallas Contract Lawyers
- Denver Contract Lawyers
- Fort Lauderdale Contract Lawyers
- Houston Contract Lawyers
- Las Vegas Contract Lawyers
- Los Angeles Contract Lawyers
- Memphis Contract Lawyers
- Miami Contract Lawyers
- New York Contract Lawyers
- Oklahoma City Contract Lawyers
- Orlando Contract Lawyers
- Philadelphia Contract Lawyers
- Phoenix Contract Lawyers
- Richmond Contract Lawyers
- Salt Lake City Contract Lawyers
- San Antonio Contract Lawyers
- San Diego Contract Lawyers
- San Francisco Contract Lawyers
- Seattle Contract Lawyers
- Tampa Contract Lawyers
Quick, user friendly and one of the better ways I've come across to get ahold of lawyers willing to take new clients.
View Trustpilot ReviewContracts Counsel was incredibly helpful and easy to use. I submitted a project for a lawyer's help within a day I had received over 6 proposals from qualified lawyers. I submitted a bid that works best for my business and we went forward with the project.
View Trustpilot ReviewI never knew how difficult it was to obtain representation or a lawyer, and ContractsCounsel was EXACTLY the type of service I was hoping for when I was in a pinch. Working with their service was efficient, effective and made me feel in control. Thank you so much and should I ever need attorney services down the road, I'll certainly be a repeat customer.
View Trustpilot ReviewI got 5 bids within 24h of posting my project. I choose the person who provided the most detailed and relevant intro letter, highlighting their experience relevant to my project. I am very satisfied with the outcome and quality of the two agreements that were produced, they actually far exceed my expectations.
View Trustpilot Review