01.

Subrogation it is the substitution of one person in the place of another, whether as a creditor or as
the possessor of any rightful claim The substitute is put in all respects in the place of the party to whose
rights he is subrogated.1 It is a right as explained under section 79 of UK Marine Insurance Act 2that
Where the insurer pays for a total loss, either of the whole, or in the case of goods of any apportionable
part, of the subject-matter insured, he thereupon becomes entitled to take over the interest of the
assured in whatever may remain of the subject-matter so paid for, and he is thereby subrogated to all
the rights and remedies of the assured in and in respect of that subject-matter as from the time of the
casualty causing the loss.As it is made applicable in Tanzania under section 2(3) and 9 of Judicature and
Application of Laws Act3 In Castellain v Preston4 it was said that the right of the insurer is to enforce any
right of the insured person which will diminish the overall loss and that the right of recovery could not
be limited to those payments which were made in respect of the loss. Although the point received
considerable attention in that case, it does not appear to have major practical significance. Indeed, it
may be that it is a distinction without a difference, for almost any payment which goes to diminish the
loss will be made in respect of the loss, since it cannot be supposed that the Court of Appeal meant to
include within the doctrine of subrogation every payment received by the insured irrespective of its
source.

It was also explained in the Burnand v Rodocanachi Sons and Co5 Lord Blackburn explained the
application of subrogation in these words: The general rule of law and its obvious justice is that where
there is a contract of indemnity (it matters not whether it is a marine policy, or a policy against fire on
land, or any other contract of indemnity) and a loss happens, anything which reduces or diminishes that
loss reduces or diminishes the amount which the indemnifier is bound to pay; and if the indemnifier has
already paid it, then, if anything which diminishes the loss comes into the hands of the person to whom
he has paid it, it becomes an equity that the person who has already paid the full indemnity is entitled to
be recouped by having that amount back

It may happen that an insured loss is caused by a breach of duty (contractual, tortious or statutory) by a
third party. In such a case the insured appears to have two rights of action; one against the insurer for
the insured loss under the policy, the other against the wrongdoer who caused the loss. The existence of
the action against the wrongdoer does not prevent the policyholder from claiming on the insurance
policy as it was held in Nor Mason v Sainsbury6

A waiver of subrogation is a contractual provision whereby an insured waives the right of their insurance
carrier to seek redress or seek compensation for losses from a negligent third party. Typically, insurers

1
Henry Newton Sheldon (2017). The Law of Subrogation (1st ed.). Andesite Press

2
Cap 41 of 1906

3
Cap 358 RE 2019

4
(1883) 11 QBD 380, CA

5
(1882) 7 App Cas 333 (Appendix 9.3).

6
(1782) 3 Doug KB 61
charge an additional fee for a waiver of subrogation endorsement. Many construction contracts and
leases include a waiver of subrogation clause.Such provisions prevent one party’s insurance carrier from
pursuing a claim against the other contractual party in an attempt to recover money paid by the
insurance company to the insured or to a third party to resolve a covered claim.

In other words, if subrogation is waived, the insurance company cannot "step into the client's shoes"
once a claim has been settled and sue the other party to recoup their losses. Thus, if subrogation is
waived, the insurer is exposed to greater risk.Insurance companies frequently charge an additional fee
on top of the premium to include a waiver of subrogation clause. Parties to the contract avoid litigation,
and the insurance company bears the loss.

Generally, the idea behind the waiver is to prevent one person's insurance company from pursuing
subrogation in other words, from taking the other person to court in a lawsuit. Including a waiver of
subrogation clause in a lease or other business agreement is a good idea for both parties because it can
prevent potentially expensive and time-consuming litigation after the loss.

This was illustrated in the Australian case of Woodside Petroleum Pty Ltd et vs.H&R-E&Y Pty Ltd et7 In
the Australian case, the Full Bench of the Supreme Court of Western Australia held that, a defendant
who is not a party to the contract of insurance that contains a waiver of subrogation clause can
nonetheless enforce it against an insurer claimant that is trying to exercise its rights of subrogation and
sue for damages. The point here is that, the waiver created a blockade or exclusion to the third party.

The matter was also discussed In West of England Fire Insurance Co v Isaacs8, the insured was paid for
fire damage that he had suffered. The insured had a right of action against the lessee for breach of
covenant, but the insured chose to relinquish such rights, thus preventing the insurer from exercising
those rights. The Court of Appeal held that the insured was liable to repay the insured sum to the
insurers.

Also In Ultimate security Tanzania limited V. Maxinsure Tanzania Limited9 The court held that no waiver
of subrogation clause. In the first place, and as I stated herein earlier, it was clear from the evidence and
the facts of the case before the trial court that, the contract of insurance between M/s Excel Crop Care
(Africa) Ltd and the Respondent did not waive the possibility to subrogate.

Circumstances under which the insurer's right of subrogation is waived.

Construction Contracts

Sometimes, construction contracts contain a waiver of subrogation clause. In these clauses, the owner
waives all rights to sue third parties, such as contractors and subcontractors, for damages caused by

7
(1999) 20 WAR 380

8
[1897] 1 QB 226

9
Commercial Appeal No 2 of 2020 HC Commercial Division At Dar es Salaam
perils covered in the owner's insurance policy. Under this provision, the owner's insurer also agrees that
they will pay covered losses and will not seek to recoup these losses from the negligent party.

In the US case of National Union Fire company of pittsburgh,PA V. Pennzoil Company 10The court
enforced waiver of subrogation clause in a certificate of insurance executed by workers compensation
carrier in favour of the oil company which has hired the insured contractor to drill a well for it. The
waiver prevented the carrier from intervening in third party action brought by the contractor's
employee against the oil company.

The waiver of subrogation clauses has exceptions. If the owner's property insurance does not insure
against a specific risk, the owner may seek recovery from the responsible party. Also, if the loss exceeds
the insurance policy's limit, the owner may pursue the responsible party.

Waiver of subrogation clauses in construction contracts also prevent delays in construction caused by
disputes and litigation resulting from losses. When these provisions are absent, investigations ensue to
determine fault. As with many cases, this process can take time—more time than what the owner has
allowed to complete construction. As a result, costs surmount, compromising the integrity of the
project.

Landlord and Tenant Lease Agreements

Waiver of subrogation clauses in lease contracts function similarly. The insurer cannot stand in proxy for
the owner to recover damages. If the injured party's insurance covers the claim, it must be paid, and no
further action against the third party may occur.These clauses protect the landlord and tenant from
expensive litigation costs and interruptions to the terms of the contract. Subrogation of waiver clauses
can also help preserve amicable relationships between landlords and tenants.

When a landlord includes a waiver of subrogation clause in a lease, the company issuing the tenant’s
renter’s insurance policy usually requires an additional premium for coverage of losses paid by the
insurer as a result of acts or omissions by the landlord.

This extra cost is applied because the waiver of subrogation clause prevents the insurer from asserting a
claim against the landlord for the amount paid to the insured, or on behalf of the insured, in resolution
of a covered claim.

For example, if the tenant’s guest sustains injuries incurred when a lighting fixture unexpectedly falls
from the ceiling of the leased premises, the tenant’s insurance carrier is unable to assert a claim against
the landlord for the amount paid in resolution of a claim by the guest against the tenant. Similarly, if the
lighting fixture fell on the tenant’s expensive, antique table, the waiver of subrogation prevents the
tenant’s insurance company from asserting a claim against the landlord for the amount paid to the
insured for the damage to the table.

Some leases contain mutual waivers of subrogation, where both the landlord and the tenant waive
recovery rights against each other for any claimed loss covered by insurance. In some states, existing
10
866 S.W 2d 248 (Tex appeal)
statutory law may override a waiver of subrogation and permit claims to be brought; however, in most
states, limitations of liability may absolve negligent defendants of responsibility.

Automobile Insurance Policies

When auto accidents arise, most injured parties go through the at-fault party's insurer to seek payment
for losses. Sometimes, the at-fault party seeks to settle such claims without involving insurers. One of
the most common ways to do this is to present a waiver of subrogation to the injured party.If accepted
and signed, the injured party and their insurer have no rights to pursue the at-fault for damages beyond
the settlement agreement.

Future claims are forfeited, preventing recovery from the at-fault party or their insurer. Agreeing to this
provision should be done with careful consideration, often after discussing the details with the insurer
or an attorney

For some, settling is quicker than claim processing. Accidents can adversely affect premiums or
terminate coverage for at-fault parties; therefore, settling could prevent negative activity from being
recorded on their insurance profile.

Some insurance companies do not allow their insureds to participate in waiver of subrogation
agreements as it compromises what they can recover.

Modalities of waiving the insurer’s right of subrogation;

Policy Endorsements; An endorsement is an amendment to an insurance policy that changes the terms
or conditions of the original policy. An insurer can issue an endorsement to explicitly waive subrogation
rights. Example: A commercial general liability policy might include an endorsement stating that the
insurer waives its subrogation rights against any contractors involved in the insured’s project. This
endorsement becomes part of the policy terms, binding the insurer to the waiver.

Contractual Agreements; The waiver of subrogation can be included as a clause in contracts between
parties, such as leases, construction contracts, or service agreements. These clauses must be mutually
agreed upon and documented.Example: In a lease agreement, both the landlord and tenant might
include a clause waiving subrogation rights. This means if the tenant accidentally causes a fire, the
landlord's insurer cannot pursue the tenant for recovery after compensating the landlord for the
damage.

Mutual Waivers; In situations where multiple parties are involved, such as in joint ventures or
collaborative projects, mutual waivers of subrogation can be agreed upon. This ensures that no party’s
insurer can pursue another party for recovery.Example: In a construction project, the project owner,
general contractor, and subcontractors might all agree to mutual waivers of subrogation. This simplifies
the claims process and maintains cooperative working relationships.

Specific Policy Provisions; Insurance policies can be drafted with specific provisions that automatically
include waivers of subrogation under certain conditions. These provisions are usually detailed in the
policy documentation.Example: A homeowners insurance policy might contain a provision that waives
subrogation rights against any family members residing in the home. This means the insurer will not
pursue recovery from a family member if they are responsible for a covered loss.

Agreed Written Agreements; Waivers of subrogation can be formalized through written agreements
that are signed by the involved parties. These agreements can be standalone documents or part of
broader contractual arrangements.Example: A service agreement between a company and a
maintenance provider might include a separate document, signed by both parties, waiving the insurer’s
right to subrogation against the maintenance provider in case of a loss

2.Ways upon which the insurer can limit subrogation waiver clauses

Specific Language in the Policy; Insurers can include specific language in the insurance policy that limits
the waiver to certain situations, types of claims, or named parties.Example: A policy might state that
subrogation rights are waived only for claims involving property damage and not for bodily injury claims.
The policy can explicitly mention the parties for whom subrogation is waived, such as specific
contractors or business partners.

Conditional Endorsements; Insurers can issue endorsements that place conditions on when the waiver
of subrogation is effective. This could include requiring written agreements or other preconditions
before the waiver applies.Example: An endorsement might state that the waiver of subrogation is only
valid if the waiver agreement is signed by all parties before any loss occurs. Additionally, it might require
that the waiver applies only if the third party also has insurance covering the same risk.

Financial Limits; Insurers can impose financial caps on the waiver of subrogation, ensuring it only applies
to claims below a certain threshold.Example: A policy might limit the waiver of subrogation to claims
under Tshs 100,000,000/= million . For claims exceeding this amount, the insurer retains the right to
pursue subrogation against third parties

Exclusions; Specific exclusions can be included in the waiver clause, specifying types of losses or acts
that are not covered by the waiver, such as intentional misconduct, gross negligence, or certain
categories of losses.Example: The policy could exclude waivers of subrogation for losses caused by fraud,
intentional acts, or gross negligence. It might also exclude certain types of property, such as valuable
documents or fine art, from the waiver.

Limited Time Frames; The insurer can limit the waiver to specific projects, contracts, or time periods,
ensuring that the waiver is not applicable indefinitely.Example: A waiver might be limited to the
duration of a particular construction project or the term of a lease agreement. Once the project is
completed or the lease expires, the waiver of subrogation is no longer in effect.

Named Parties Only; The waiver can be restricted to apply only to specific named parties, rather than a
broad range of third parties.Example: The policy might include a waiver of subrogation only for certain
named contractors or business partners, rather than applying to any third party with whom the insured
might interact.
Conclusively, Upon a loss, an insurer pays a claim to the insured for covered losses. If the loss was
caused by a third party, the insurer may subrogate the claim, or recover damages from the party that
caused the loss. With a waiver of subrogation, the insurer cannot pursue or sue the responsible third
party for recovery. These provisions can be found in contracts or included as addendums to existing
contracts. As with any contract, there must be an agreement by the parties to the contract to be valid, A
waiver of subrogation prevents an insurer from seeking recovery from a third party for damages paid, A
waiver of subrogation clause provides additional protection for clients in most industries, Waivers of
subrogation clauses minimize the potential for lawsuits arising from the loss that may occur during a
construction project or other contractual agreement, Insurance companies receive all of the funds that
result from a subrogation process, Waivers of subrogation can prevent lengthy litigation and ruined
business relationships.These waivers, while mutually beneficial, do come with some drawbacks. First,
the policyholder must find out if their insurance provider will not consider them in breach of contract if
they sign a waiver of subrogation. If the provider allows the policyholder to sign the contract and not
breach the contract with the provider, it is likely that the covered's premiums will increase to
compensate the provider for the possibility of loss.These contracts must be specifically worded and
unambiguous for a court to enforce the contract. If there is unclear language in them, the provider may
still be able to sue the one responsible for causing the damages that initiated the loss.
 REFERENCES;

ACTS

UK Marine Insurance Act Cap 41 of 1906

Judicature and Application of Laws Act Cap 358 RE 2019

BOOKS AND JOURNALS

Henry Newton Sheldon (2017). The Law of Subrogation (1st ed.). Andesite Press

Hodgin, R. (2002). Insurance Law: Text and Materials (2nd ed.). Routledge-

Byamugisha, J. B. (1977). Insurance law in East Africa. East African Literature Bureau.

CASELAWS;

Castellain v Preston [(1883) 11 QBD 380, CA]

Nor Mason v Sainsbury (1782) 3 Doug KB 61

Woodside Petroleum Pty Ltd et vs.H&R-E&Y Pty Ltd et. (1999) 20 WAR 380

Ultimate security Tanzania limited V. Maxinsure Tanzania Limited there Commercial Appeal No 2 of 2020
HC Commercial Division At Dar es Salaam

National Union Fire company of pittsburgh,PA V. Pennzoil Company ,866 S.W 2d 248 (Tex appeal)

West of England Fire Insurance Co v Isaacs [1897] 1 QB 226

Burnand v Rodocanachi Sons and Co (1882) 7 App Cas 333 (Appendix 9.3)