Waiver of Subrogation, What is it?

If after an insurance claim is paid out by your insurance company, it is deemed that another party was actually the negligent one, then your insurance company (via the insurance policy contract) has the right to go after the negligent party. This right is usually found in the "Conditions" section of your insurance policy. This conditional right can, however, be waived. This means that your insurance company would then not be allowed to go after the negligent party. The term for this waiving of rights is called Wavier of Subrogation.

Often you will see the Waiver of Subrogation in commercial leases. Landlords will require that tenants have this verbiage in their insurance policy so that if a claim occurs at the leased location that the tenant's insurance company cannot come back after them for damages. The landlord, however, would be less inclined to have this wording on their policy since it would mean they and their insurance company would not be allowed to go after their tenant after a claim. A building owner and their insurance company usually have more to lose (the building and its rental income) than the tenant does so they would be very interested in being able to go back after a negligent party.

There are two example of where a landlord may want the Waiver of Subrogation wording on their own insurance policy. The first is if they are renting to a family member or friend who they know doesn't either have enough assets or money to be able to cover them in case of a claim, they may not want their insurance company to be able to go after them to collect for damages. The second is if the landlord and tenant are owned by the same person or organization. In some cases, usually for legal or tax reasons, a person may have one company that owns the building and another company that owns the business that is the tenant. In those cases you would probably want both the landlord and tenant policy to have a Waiver of Subrogation clause in their policies so that you don't have your two insurance companies fighting over payout.

Another place where you will see Wavier of Subrogation is in situations where companies or organizations will subcontract work to other companies or organizations. Often, if a business is going to hire another business to do work on their behalf they will request that the subcontractor have Wavier of Subrogation on their policy. Similar to the Landlord/Tenant relationship, if the contractor requires the subcontractor to have Waiver of Subrogation on their policy it means the subcontractor, if a claim arises, is not able to go back after the contractor for money.

When entering into a lease or a business contract it is important to know if you are going to be required to have Waiver of Subrogation and if you have it or not in your insurance policy. It is best to have both your legal team and your insurance professionals review contracts to make sure you are adequately protected.

Tenant’s Improvements to the Premises

A common circumstance surrounding commercial leases involves the tenant making alterations, or improvementsto the rented premises. A strip mall retail location could be used for many different types of tenants. It is unreasonable to assume that the premises is already set up to handle any type of tenant from a clothing store to a restaurant. For example, a new tenant might have to build partitions, add refrigeration or install a kitchen.

The commercial property policy defines improvements and betterments as “fixtures, alterations, installations or additions that are made a part of the building that is occupied but not owned by the named insured, and that the named insured acquires or makes at his expense but cannot legally remove.” Since business personal property coverage insures the tenant’s “use interest” in improvements and betterments located at the rented premises, the amount of these improvements should be calculated into the limit you choose for your business personal property.

“Wear and Tear” Vs. “Sudden and Accidental”

Two terms that are important to know when it comes to the reason behind an insurance claim. Those terms are “Wear and Tear” and “Sudden and Accidental”.

“Wear and tear” is defined by Wikipedia as “damage that naturally and inevitably occurs as a result of normal wear or aging.” An example on a home would be a house settling over time, a pipe that corrodes and leaks water over several months or years, or a roof that after 15 years starts to drop shingles. All these items would not be covered under an insurance policy as an insurance policy does not cover “Wear and Tear”. Insurance policies cover “Sudden and Accidental” events.

So what is “Sudden and Accidental”? The best way to define it is by giving examples. If a pipe in your house just suddenly burst from pressure or because of freezing that is sudden and was done accidently. If wind blows through your neighborhood and suddenly blows off your roof or chunks of your roof that is sudden and accidental. If a tree falls and damages your home that event is sudden and accidental.

“Sudden and Accidental” events are things people can not totally prevent which is why insurance exists and covers them. On the other hand, “Wear and Tear” damage can be prevented by making sure your property is well maintained and updated. Insurance policies are not maintenance contracts.

So next time you have damage to your property ask yourself is this “Wear and Tear” or “Sudden and Accidental”? If it is “Sudden and Accidental” be sure to call your insurance agent or if you are not sure which it falls under call your insurance agent and let them help you figure that out.

Special Limits in Your Homeowner Policy

Your homeowners insurance policy places limits on certain types of property. In your policy there is a section titled “Special Limits on Certain Property.” This section will list various items and place a dollar limit on each type of property- such as jewelry, fine arts, guns or money.

Why do insurance policies contain such provisions? The homeowners insurance policy is written to provide coverage for the average policy holder. Most of us do not own collections or keep large amounts of cash at our homes. While the policy provides some limited coverage for special types of property, it in no way serves the needs of the unique collector.

There is, however, a solution for the collector or owner of unusual property items. It is possible to amend your homeowners policy, by endorsement, to provide special coverage for unique collection items such as coins or stamps. By asking your agent to include a schedule property floater in your coverage, you can specifically insure items of special interest. The personal property floater also expands coverage for perils not included in the homeowner policy.

Earthquake Insurance in Ohio!? (Re Post from July 2, 2010)

The recent tragedy that has struck Japan is heart breaking. Our thoughts and prayers go out to all those people who suffered loss from this disaster. Recently we did a repost of a flood insurance article since it had been in the news in Ohio and we are sad that once again we are doing a repost due to another natural disaster. Below is our July 2^nd post from 2010 about earthquakes.

Also, with this post I would like to also encourage all of you to please be sure to research and see what you might be able to do to lend support to those in Japan.

Re Post from July 2^nd, 2010:

The big question going around on June 23rd was, “Did you feel the earthquake”. Many thought people were joking, but when they checked their Facebook page and saw that many of their friends in the Ohio area had felt the earth move, they knew the question was legit. The reason Ohioans felt the earth move was just north of us, Canada had a 5.0 magnitude earthquake. Though we are not California or anywhere near California, Ohio still has their fair share of earthquakes. On average Ohio has 5 to 6 earthquakes a year. Year to date in 2010 we have already had 6, so the question that has to be asked of this insurance blog is should people in Ohio carry earthquake insurance? We at Fey Insurance Services feel that it is a good idea to have this coverage. It is something we always quote to our customers. For an average valued house the premium can range from $50 to $80 a year. Though we only have little earthquakes the potential for a large scale quake is there and if that happened the affects would be devastating to a home.Feel free to get in touch with us to inquire about earthquake insurance