Source: Robin Roth, Senior Contracts Editor
E-Specs: September 27, 2005

Among the more puzzling terms meeting planners run across in facility contracts is the waiver of subrogation. Few planners seem to know what it means. It has to do with insurance requirements and is encountered most often in convention center license agreements. The best way to deal with all insurance questions is to consult your insurance agent, but, as with all contract terminology, enlightenment serves you better than needing to ask. (Did someone say knowledge is power?)

What is subrogation? Every group (or individual) has the right to sue. When a group purchases insurance and the insurance company then pays out on a claim for the group, the insurance company may take over the right of the group to sue, which is called subrogation. The insurance company then sues the party that was responsible in order to recover the amount of the claim.

Why would subrogation be waived? If subrogation is waived by the group, it means that the group gives up its right to have the insurance company sue on its behalf. The waiver of subrogation is best negotiated as a mutual provision. It is beneficial because if subrogation is NOT waived by the center, a group could pay large dollar amounts out of pocket over its insurance coverage in the event the group is sued.

How could this happen? If the group causes damage to the center through its negligence (by causing a fire, let's say), the center's insurance company may pay out a large amount for the claim for the damage. Then if subrogation is allowed for the center, the center's insurance company can turn around and sue the group to recover the amount of the claim. This could be very expensive if the amount exceeds the limits of the group's insurance.

But don't centers require the group to carry adequate insurance? Centers usually require groups to obtain at least $1,000,000 coverage for the group's negligence but such an amount would not be sufficient to cover a major claim.

How is a mutual waiver of subrogation obtained? It is part of the lease and each party informs its insurance company before any losses occur.

Bottom line - what is the benefit? A mutual waiver of subrogation limits the parties' exposure to liability to the amount of their insurance policies and should be considered as part of the parties' overall risk management strategy.

(Note: This information is not intended to be "legal advice." A qualified attorney should be consulted to review all contract issues.)