Subrogation
Subrogation is the insurer's right to recover what it paid on a claim from the party responsible for the loss. If a vendor causes damage and the insurer pays, the insurer may pursue the vendor to recover the payment.
By Andrew Bate, Co-founderReviewed by Stuart BateUpdated
Why this matters for property managers
Management agreements sometimes waive subrogation between owner and manager so their insurers cannot sue each other after a loss. A waiver of subrogation must be endorsed onto the policy — a certificate alone does not create it.
Worked example
A vendor's ladder cracks a $4,000 glass door at a managed home. The damage program pays the owner within days, then recovers the cost from the vendor's liability insurer. The owner is made whole without waiting, and the recovery returns to the program's escrow.
Waivers of subrogation in management agreements
Owners' attorneys routinely add a mutual waiver of subrogation to the management agreement, so that after a loss the owner's insurer cannot sue the manager and the manager's insurer cannot sue the owner. The clause only works if each policy carries a waiver of subrogation endorsement; a certificate of insurance that mentions the waiver without the endorsement behind it is worth nothing in a dispute. A blanket waiver endorsement covers every owner in the portfolio at once. In a damage program the direction is the opposite: the guest damage waiver is the manager releasing recovery against the guest for covered accidental damage, which is exactly why guests pay the fee.
Related terms
Browse every term in the insurance glossary for property managers.
Subrogation: common questions
What is a waiver of subrogation?
A policy endorsement in which the insurer gives up its right to recover from a specified party, usually required by a contract.
Can an insurer subrogate against a guest?
In principle yes, for damage the guest caused. In practice, waiver programs release guests from liability for accidental damage up to the waiver limit, which is part of their appeal.
Want this explained for your portfolio?
Our team speaks plain English and knows property management. Ask us how this applies to the homes you manage.
Get a Quote