A Brief Introduction About the Subrogation Agreement
When you are in the insurance industry, you might have come across the term “subrogation” provision. In other instances, you might be asked to sign a subrogation agreement as a part of the deal for getting involved in the insurance industry. The question is, “Do you really understand the provision for the waiver of subrogation as specified in the agreement form in the insurance industry?” Anytime you would be signing a subrogation clause for the assurance of professional services, you should understand the consequences of the individual subrogation clause in the given agreement.
Who Takes the Subrogation Agreement- People Involved
As per the subrogation meaning, it is known to imply the assumption by some third party (including an insurance company or a second creditor) about the legal rights of another party for collecting the amount for damages or debt amount. The subrogation contract is referred to as a legal doctrine in which one party is entitled to enforcing the revived rights of the other party for personal benefits.
Purpose of the Subrogation Agreement- Why Do You Need It?
Subrogation is known to refer to the act of a specific party or person standing in the place of another party or person. Effectively, a subrogation agreement is used for defining the rights of a given insurance company before as well as after the company has made claims made against the particular policy. Subrogation claims are known to make the process of obtaining a settlement under the given insurance policy run seamlessly.
Subrogation contract is mostly involved in the insurance sector –especially with respect to the auto insurance policies. It is known to known hold valid when the respective insurance carrier is known to take on the financial stress of the insured party due to some injury or payment due to an accident while seeking repayment from the party which is it at-fault.
Contents of the Subrogation Agreement- Inclusions
The situation in which the subrogation agreement is made available does not remain closed and might vary from one jurisdiction to another. The subrogation contract is typically known to arise in third-party situations. Some of the common contents of a typical subrogation contract might be:
- Indemnity Insurance
- Laws of Guarantee
- Trust Creditors
- Subrogation to Outgoing Securities
- Bills of Exchange
Some of the additional contents of this agreement are the specific terms & conditions, governing law & jurisdiction, name & details of the parties involved in the agreement, and so more.
How to Draft the Subrogation Agreement – Points to Remember While Drafting the Agreement
When you are drafting the subrogation agreement sample, you should take into consideration the respective rights of each party involved in the contract. Starting with entering the name of the insurance company and its details, you should also include the details with respect to the insurer of the given insurance policy. Then, you are required to enter the nature of the peril that has resulted in the subrogation claim. You are also required to specify the type of insurance coverage under which the claim was made.
In a typical subrogation agreement, the insured party shall consider separately specifying its rights for recovering the deductible loss. An experienced subrogation attorney can help you in drafting the contents of the agreement for meeting specific conditions that are imposed by the given set of equitable principles. Some of the possible conditions can be:
- Payment should be rendered by the involved creditor (also referred to as the subrogee) towards securing or protecting the respective personal interests
- The subrogee should not act as a volunteer by mistake
- The subrogee should not be held primarily responsible for the debt paid
- The debt should be paid in its entirety
- The agreement should not lead to any kind of injustice to any of the involved parties
Negotiation Strategy
There are some specific negotiation strategies that you can consider during a typical subrogation for the best results:
- The first trick is to take slow steps. It is the responsibility of the plaintiff counsel to identify as well as understand every approach for the purpose of playing the subrogation safely.
- The second strategy is that when liability tends to be unclear, or there is the unavailability of the party of interest, this can turn out to be a winning situation.
Benefits & Drawbacks of the Subrogation Agreement
Some of the major benefits of the subrogation agreement are:
- Lowering Insurance Claims: Legal scholars, as well as judges, agree that subrogation contracts serve to be an important component in the overall calculation of the premium costs. Revenue that is gained by the insurer, either through the collection obtained from the subrogation agreement or otherwise, can be helpful in providing a response to the actual risks to the insurer under the given terms & conditions of the contract.
- Reducing the Number of Lawsuits: As the insurers are given the right of subrogation through this agreement, it will lead to a decrease in the number of lawsuits.
Towards understanding the drawbacks of the subrogation contract, it is important to understand the specific terms & conditions of the contract. Some of the common mistakes to avoid are:
- Waiting too much for the subrogation counsel
- Failing to recognize the third-party liability
[Also Read: Insurance Plans Agreement]
What Happens in Case of Violation?
There are certain grounds for the violation of the subrogation contract(1). However, upon violating the same, either party of the contract can go ahead with terminating the contract. Some of the specific grounds that can lead to the violation or breaching of the agreement are:
- Payment not being rendered by the subrogee or the creditor to the other party
- The subrogee acting as a volunteer or an intermediary
- The subrogee being primarily liable for the payment of the debt
- The debt not being in its entirety
- The subrogation causing any form of injustice to the other party
A waiver of subrogation is regarded as a contractual provision in which the insured individual or party is known to waive the rights of the carrier of the insurance towards seeking or redressing compensation for losses due to the negligence of the other party in the contract. Typically, insurers are known to charge some additional fees for the special policy endorsement.