What Is the Difference between a Hold Harmless Agreement and a Waiver of Subrogation? (2024)

FAQs

What Is the Difference between a Hold Harmless Agreement and a Waiver of Subrogation? ›

A hold harmless agreement differs in that it shifts liability. While a waiver of subrogation is protection from liability, it doesn't shift the liability as a hold harmless agreement does.

Conventional subrogation is the relationship between the insured and insurer as defined in an insurance contract. A hold harmless agreement is a statement in a contract that absolves one or both parties to the agreement from liability for any injuries or damage.

A hold harmless agreement, or HHA, is an agreement used to help prevent you or your organization from being held responsible for certain types of bodily injury or property damage. This type of agreement might also be referred to as a liability waiver, disclaimer, hold harmless letter, or release of liability.

Hold harmless is defined as a promise in a contract, by one party not to hold the other party responsible if the other party carries out the contract in a way that causes damage to the first party.

A waiver of subrogation means that an insurance company has a higher chance of paying out losses that it cannot recover itself. Therefore, an insurance company must charge more if the insured plans on agreeing to this clause. A waiver of subrogation is common in the construction and real estate industries.

Example: A construction equipment lease company may require its customers to agree to defend the lease company from legal claims if the customer's use of the equipment causes harm, and to reimburse the lessor for any amounts it may be found liable for in connection with the harm.

A hold harmless clause is used as a release of liability in a contract that protects one party from injury or property damage caused by another party. By signing the clause, the other party is agreeing not to hold business owners legally responsible for the risks involved in certain services.

The prevailing interpretation is that “hold harmless” and “indemnify” are synonymous. However, under the minority view, “hold harmless” requires payment of both actual losses and potential liabilities, while “indemnify” protects against incurred losses only.

A hold harmless agreement is used to protect one party in a contract from being held liable for damages or losses. By signing the agreement, the other party accepts responsibility for certain risks involved in contracting for the service.

A hold harmless clause is commonly added to contracts. The idea is to protect the company and transfer some of the company's liability to you in return for the business they are sending to you. The clause requires that you protect the company with whom you are contracting if they are sued.

What is hold harmless agreement and subrogation? ›

A hold harmless agreement differs in that it shifts liability. While a waiver of subrogation is protection from liability, it doesn't shift the liability as a hold harmless agreement does.

In general, there are three different forms of hold harmless or indemnity agreement: limited, intermediate and broad: With a limited form, the contractor (Party A) is held proportionally responsible for their liability for negligence or activities.

Business owners often agree to waivers of subrogation clauses if they see that to do otherwise would result in lengthy litigation that would cause even greater financial losses due to the need to halt projects until any lawsuit is settled.

Clients may want your business to waive your right of subrogation so they will not be held liable for damages if they are partially responsible for a loss. When you waive your right of subrogation, your business (and your insurance company) are prevented from seeking a share of any damages paid.

Expect a premium increase or extra fees if you do want to include a waiver of subrogation, since it exposes your insurance company to greater risk. One way you can balance out the added insurance expense is by factoring it into the rates you charge clients.

Clients may want your business to waive your right of subrogation so they will not be held liable for damages if they are partially responsible for a loss. When you waive your right of subrogation, your business (and your insurance company) are prevented from seeking a share of any damages paid.

A waiver of subrogation keeps insurance companies from suing the party that caused damages to recoup the loss created from paying the covered party. The two types of waivers are scheduled and blanket waivers of subrogation. These waivers are used to maintain relationships between parties that rely on each other.

Types of Hold Harmless Agreements

There are three “levels” of hold harmless agreements, each of which waives a different level of liability. In order from most to least protective, the three types of indemnity agreements are broad form, intermediate form, and limited form.

There are two different versions of a waiver endorsem*nt that an insurance carrier can offer under a policy to provide this coverage. They are as follows: Scheduled Waiver of Subrogation. Blanket Waiver of Subrogation.