Subrogation Clause

A "subrogation clause" in contracts addresses the rights of an insurer to assume the legal rights and remedies of the insured after settling a claim. It allows the insurer to pursue recovery against third parties responsible for the loss or damage.

The key elements of a subrogation clause in a commercial contract include:

  • Insurer's Right to Subrogation: It clearly states the insurer's right to subrogation after settling a claim.
  • Obligation to Cooperate: It imposes an obligation on the insured to cooperate with the insurer in pursuing subrogation.
  • Limitations on Subrogation: This clause may specify limitations or exclusions to the insurer's subrogation rights.
  • Preservation of Rights: This clause addresses the preservation of the insured's rights against third parties even after subrogation.

Examples of Subrogation Clause in a commercial contract include:

  • In a construction contract, a subrogation clause may allow the insurer to pursue recovery from subcontractors responsible for damages.
  • A lease agreement might include a subrogation clause, enabling the property owner's insurer to recover from tenants for damages caused by the tenants.
  • An insurance policy may contain a subrogation clause, allowing the insurer to recover from third parties responsible for an insured loss.

The subrogation clause plays a crucial role in insurance-related contracts by defining the rights of insurers to pursue recovery after settling claims. With clear terms on subrogation rights, cooperation, limitations, and the preservation of insured rights, it ensures a balanced approach in risk allocation.

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