My company?s lease contains a provision called ?Mutual Waiver of Subrogation.? What does this mean?
November 2, 2007

Q: My company?s lease contains a provision called ?Mutual Waiver of Subrogation.? What does this mean?

A: If properly drafted, this provision actually is quite beneficial to commercial tenants. Subrogation allows one party to ?step into the shoes? of another and pursue any legal actions available to that party. Thus, a tenant?s negligence causes $10 million in damage to the property, the landlord will ask its property insurance company to pay for the loss. Without a waiver of subrogation clause, the landlord?s insurance company will subrogate through the landlord and sue the tenant to recover the $10 million. However, the tenant?s insurance is unlikely to be that high, exposing the tenant to substantial liability. The waiver of subrogation prevents the landlord?s insurance company from recovering the loss from the tenant. The property insurance company must consent to the waiver of subrogation, but that consent is usually already in the policy or is readily given.

If you have questions, please contact:
John Wise, Esquire

(410) 752-2468