Monitoring contracts and the waiver of subrogation clause
By Canadian SecurityFeatures Opinion
Q. What is the purpose of a waiver of subrogation clause in an alarm monitoring contract?
A. Subrogation is an insurance term that refers to the right of an insurer to bring an action in the name of its insured. For example, it allows the customer’s insurance company to sue the person or organization that allegedly caused the customer’s loss or damage (e.g., the alarm installer or monitoring station). The amount of the lawsuit depends on how much the insurance company has indemnified (i.e., paid to) its insured (i.e., the customer) on the insured’s claim. In effect, the insurance company is seeking reimbursement from the person or organization that allegedly caused the loss or damage. The insurance company “steps into the shoes” of the customer and can take advantage of any means available to the insured to recover from third parties who caused the loss.
When subrogation is waived by the customer in an alarm monitoring contract, the insurance company cannot sue in its customer’s name. Therefore, many insurance companies insist that its customers not sign any alarm contract or monitoring contract containing such a waiver (or ask that the waiver clause be struck out and initialed before the customer signs). Even though the insurance company is not a party to the monitoring contract, it is still bound by the waiver because the insurance company has the same rights (and limitations) as its insured.
So, a waiver of subrogation clause is a very important clause to include in an alarm monitoring contract. How important? Well, just look at the recently decided appeal case involving ADT and Diebold (in the U.S.A.) as described by U.S. Attorney Kenneth Kirschenbaum on his website:
“Under its agreement with Diebold, plaintiff was required to insure the premises and their contents against perils that included theft, and to look solely to its insurer for recovery in the event of a loss, waiving all such claims against Diebold. This waiver-of-subrogation provision constitutes a defense to all of plaintiff’s claims, including gross negligence (see Great Am. Ins. Co. of N.Y. v Simplexgrinnell LP, 60 AD3d 456 ). Although plaintiff’s agreement with ADT did not contain a waiver-of-subrogation provision, it did require plaintiff to obtain its own insurance to cover the loss.”
Suggested wording for a Waiver of Subrogation clause is as follows:
Waiver of Subrogation: All insurance policies of Customer shall include a waiver of subrogation against (the alarm installer and/or monitoring station) its parent, affiliated and subsidiary companies and entities, and their respective successors, assigns, directors, officers, agents, and employees.
Subrogation is a method through which insurers recover amounts paid to their insureds and place the responsibility for the loss with those that caused it. Alarm installers and monitoring stations should consider amending their contracts with their customers to include a waiver of subrogation clause so as to reduce or eliminate their liability.
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