Definition of "Subrogation clause"
Section of property insurance and liability insurance policies giving an insurer the right to take legal action against a third party responsible for a loss to an insured for which a claim has been paid. For example, an insurance company pays a claim for $40,000 in damages to an insured storekeeper for losses caused by a negligent contractor working next door. The policy's subrogation clause gives the insurer the right to be subrogated to, or take on as its own, the storekeeper's claim and to sue the contractor for damages. Understanding subrogation and the decision to obtain a waiver is very important for commercial leases. If you are looking to buy or lease a commercial property, a commercial real estate agent should be able to explain to you the implications of including or excluding such a clause.
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