Indemnification and waiver of subrogation

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    Michael Ermann

    Indemnity: I'm signing a contract that frees you of liability and puts the blame back on me.

    So when you rent a jet ski, the proprietor may ask you to sign a waiver of liability: a form that indemnifies the proprietor of liability if you ram a swimmer with their jet ski. Because in construction the risks are significant and the stakes are high, everyone is looking for indemnity. They want to pass the risk of a claim onto you. Don't let them do that.

    Subrogation

    Subrogation: Process of the insurance company assuming agency for an insured party in order to sue another party.

    For example, an electrical subcontractor error triggers a fire. The contractor’s insurance company, Amber Insurance, pays the contractor promptly for the damage, which is the type of prompt service the contractor has been paying for over the years in its monthly premiums.

    In the policy, the contractor has given permission ahead of time for Amber Insurance to pursue reimbursement from the electrical subcontractor (or the sub’s insurance policy). Amber can then “stand in your shoes” and chase down reimbursement as your agent, as if you were suing. You also give up your right to sue the subcontractor to collect damages. It happened, the insurance company already paid you to make you whole, and now they alone have the right to make themselves whole by filing a claim against the party at fault.

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