Understanding a Waiver of Recourse

Imagine being in a car accident with another driver who’s at fault for the accident. After an investigation and review by a claims adjuster, your insurance provider would cover the costs for repair minus a deductible. That company might sue the at-fault driver for other damages. This is what is known as subrogation. One might wonder about a similar scenario where the insured is at fault for the accident. Can the insurer seek damages from the insured?

What Is a Waiver of Recourse?

Typically a liability insurance policy will include a waiver of recourse or WOR from the insurance company. This provision means that the insurance company won’t pursue reimbursement of any payments they’ve made by the insured. Such a provision cannot be covered with the plan, so the insured must cover this provision out of pocket. This WOR premium is often covered by one of the following:

  • Insured individual or fiduciary
  • Employer or employer association
  • Employee union

What Else Is There To Know?

Although it might seem counterintuitive, a WOR is there to protect the insured. The cost of a WOR premium is significantly less than a fiduciary’s potential liability without the provision in place. For this reason, a broker might recommend that the insured pay for a WOR provision for an excess policy.  This eliminates the possibility of a policyholder being personally liable.

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