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Question - subrogation clause
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Ken
    I have a customer that wants me to waive the subrogation clause in my contract.  I do also have a limited liability clause but not sure if removing this clause is a good idea.  The account has four locations with nice recurring so it is tempting.  How much does removing this clause effect me exposure .
Joe
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Answer
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    The waiver of subrogation clause is one of the more potent protective provisions because it's been around the longest and has been consistently enforced throughout the country.  Courts view the waiver as a shifting of risk and liability, which the parties to a contract can do as long as it's clear and the contract is not otherwise unconscionable or executed under deceptive circumstances.
    Subrogation is when the rights of one party, the one who suffered the loss, are transferred or assigned by operation of law to another party who compensates the injured party.  Typical scenario is when your subscriber suffers a loss, is paid by its insurance company, who then sues you under its subrogation rights.  In this situation the insurance company succeeds to the rights of your subscriber, which means whatever claim or cause of action the subscriber may have against you can be asserted by the insurance carrier.  The carrier is going to be subject to the same protective provisions in the alarm contract as the subscriber would be faced with.  
    The reason the subrogation clause is so important is that with that provision you don't have to get into the enforcement of the other protective provisions, such as the exculpatory clause and limitation of liability clause.  If you visualize it as a batter in a baseball game who has to get from home plate, around the bases back to home plate, passing over first second and third base we would have the exculpatory clause at first, insurance procurement at second and limitation of liability at third.  With the subrogation clause the batter doesn't even get a hit; strike out at home.
    The subrogation clause can be waived by your subscriber and there isn't anything the carrier can do about it, at least to you.  You will find, however, that some subscribers balk at waiving the subrogation.  They believe that their insurance policy may be affected [and don't think it is typically] or that they are going to suffer some other adverse consequence.  From what I have seen, by the time the issue of the subrogation waiver comes up the subscriber has been paid, the insurance carrier makes a claim against you, we let them know about the alarm contract containing the waiver of subrogation, and that is the last we hear from them.
    A potential claim is not disposed of as easily if there is no subrogation waiver.  When the carrier makes the claim we point out that there are other protective provisions, but the carrier often will seek to circumvent those provisions by characterizing the alarm company's conduct as "gross" negligence or willful conduct or some other argument that the contract terms are not enforceable.  Unfortunately sometimes the carrier is right and we have trouble enforcing the other protective provisions.
    So does this mean that you should never delete the waiver of subrogation in your contract?  No.  Like the other protective provisions, and in fact the entire alarm contract which is written to protect your interests, you can delete one and hope to rely on the others, or in some circumstances you will be deleting all of them [or worse signing the subscriber's form contract] and losing or assuming liability.  The important thing to remember is that you should knowingly assume and accept this risk and try and mitigate your exposure by taking measures to carefully perform your duties under the contract and by maintaining adequate E&O insurance.
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