A waiver of subrogation in a commercial lease is a promise by the landlord and the tenant that neither will let its own insurer come after the other for a loss the insurance already paid. It works in two halves: the lease contains the waiver, and each party's policy has to permit it. Get one half without the other and the clause does not protect anyone.
This is one of the few lease provisions where both sides genuinely want the same outcome, which is why it is usually mutual and usually not fought over. It is also one of the most commonly missed items in a lease record, because it sits in the insurance article rather than the default article, and because nobody thinks about it until a fire has already happened and a carrier is threatening to sue the other party to the lease.
Here is what the clause does, what courts do when the lease is silent, why the policy language matters as much as the lease language, and which fields to pull out of the insurance section when you are building a lease record.
What is a waiver of subrogation in a lease?
Subrogation is the right an insurer has to step into its policyholder's shoes after paying a claim and pursue whoever caused the loss. Pay the landlord $400,000 for a fire and the insurer inherits the landlord's negligence claim against whoever started it. If the tenant started it, the tenant is the target.
A waiver of subrogation shuts that door in advance. The landlord agrees that its property insurer will not pursue the tenant, and the tenant agrees the same about its own carrier. Both parties still carry insurance. What changes is that the loss stops with the insurer that was paid to take it, instead of being pushed sideways into a lawsuit between two parties who are supposed to be doing business together for the next ten years.
The economic argument for it is straightforward. Both sides are already paying premiums for the same building. Letting the carriers chase each other means the loss gets litigated twice, once by the insurer and once by whoever the tenant tenders the claim to, and the parties fund both sides of that litigation through their premiums. The Connecticut Supreme Court called this out directly in DiLullo v. Joseph, 259 Conn. 847 (2002), grounding its decision in what it described as a "strong public policy against economic waste."
What does a waiver of subrogation clause look like?
Drafting varies, but a mutual clause in a US commercial lease usually reads close to this:
Notwithstanding anything to the contrary in this Lease, Landlord and Tenant each hereby waive any and all rights of recovery against the other, and against the officers, employees, agents and representatives of the other, for loss of or damage to the property of the waiving party to the extent such loss or damage is insured against under any property insurance policy required to be maintained under this Lease, whether or not such loss is caused by the negligence of the other party. Each party shall cause its property insurance policies to contain a provision permitting such waiver, or an endorsement waiving the insurer's right of subrogation.
Three parts of that are load bearing, and cheap forms drop them. The phrase "whether or not such loss is caused by the negligence of the other party" is the whole point, because without it the waiver arguably does nothing in the exact case you bought it for. The words "required to be maintained under this Lease" tie the waiver to a defined coverage obligation rather than to whatever the party happened to buy. And the last sentence is the operative one, because a lease waiver that the policy does not permit can void coverage instead of preventing a lawsuit.
What is a mutual waiver of subrogation?
A mutual waiver runs in both directions: landlord waives against tenant, tenant waives against landlord. A one-sided waiver protects only the party who negotiated it, and in a landlord form lease the one that survives is usually the tenant waiving in favor of the landlord.
Making it mutual is the standard tenant ask and it is rarely refused, because refusing it means the landlord is arguing for the right to sue a tenant over a loss its own policy covered. What is worth checking is scope. A waiver limited to the premises leaves the tenant exposed for damage to the rest of the building, which in a multi-tenant property is where the large number is. Courts have noticed the same asymmetry: in Rausch v. Allstate Insurance Co., 388 Md. 690 (2005), Maryland's highest court reasoned that a tenant in a multi-unit structure is unlikely to be "thinking beyond the leased premises or, as a practical matter, would be able to afford, or possibly even obtain, sufficient liability insurance to protect against such an extended loss."
What happens if the lease is silent on subrogation?
You end up litigating the default rule, and the answer depends on the state. US courts split three ways, and Rausch is the case that maps the split most carefully.
| Approach | Rule when the lease is silent | Representative authority |
|---|---|---|
| The Sutton rule | The tenant is an implied co-insured of the landlord's property policy, so the insurer has no subrogation claim at all absent an express agreement to the contrary | Sutton v. Jondahl, 532 P.2d 478 (Okla. Ct. App. 1975); adopted in DiLullo v. Joseph, 259 Conn. 847 (2002) |
| Case by case (the majority) | No per se rule. Liability turns on the intent and reasonable expectations of the parties read from the lease as a whole | Union Mutual Fire Ins. Co. v. Joerg, 175 Vt. 196 (2003), quoted with approval in Rausch |
| Pro subrogation | Absent an express or implied agreement that insurance was for the mutual benefit of both, the insurer may pursue the negligent tenant | The minority line discussed in Rausch, 388 Md. 690 (2005) |
The Oklahoma court that started the first line put it plainly: "the law considers the tenant as a co-insured of the landlord absent an express agreement between them to the contrary." Connecticut then adopted that result as its default rule while being candid that ordinary contract principles pointed the other way. As the DiLullo court framed the question, landlords and tenants "are always free to allocate their risks and coverages by specific agreements, in their leases or otherwise," and the only issue was what should happen when they had not.
The practical read for a US commercial portfolio is simple. In the case by case states, which is most of them, whether your tenant gets sued after a fire depends on how a judge later reads a lease that never addressed the question. That is a bad place to be, and it is entirely avoidable with two sentences at signing.
Does your insurance policy have to allow the waiver?
Yes, and this is the half that gets skipped. Property policies contain a condition transferring the insured's rights of recovery to the insurer once a claim is paid. Most of them allow the insured to give that right away, but only on specific terms. The policy at issue in Rausch is a good example of the standard shape: the insured could waive "your rights to recover against another person for loss involving the property covered by this policy" only if the waiver was in writing and was given prior to the date of loss.
Two consequences follow, and both are operational rather than legal.
First, timing. A waiver signed after the fire is worthless under that wording. The lease has to be executed, with the waiver in it, before anything happens. That is normally automatic, but it is not automatic in a holdover, in a month to month extension that was never papered, or where the parties have been operating off an expired lease for two years.
Second, evidence. The waiver has to be reflected in the policies, which for the general liability side usually means a specific endorsement rather than a policy default. The place that shows up is the certificate of insurance, and the certificate is the thing somebody actually has to collect, read and re-collect every renewal. On a portfolio of any size that becomes a real administrative job, which is why tracking those certificates and their endorsements is normally handled as its own workflow rather than as a note in a lease file. A lease that promises a waiver, backed by a policy nobody has verified, is a waiver in name only.
Waiver of subrogation on a commercial property policy versus liability
These get conflated because the lease clause covers both, but they behave differently.
On the property side, the waiver is generally accomplished by the lease language itself, read together with the policy condition that permits a written pre-loss waiver. On the liability side, a waiver is normally added by endorsement to the general liability policy, and it is commonly requested alongside additional insured status and primary and non-contributory wording. Those three requests travel together in commercial lease insurance articles, and they are three different things doing three different jobs.
Whichever side you are on, ask for the endorsement rather than the promise. A tenant that agrees in the lease to obtain a waiver endorsement, and then buys a policy that does not include one, has breached the lease and left both parties exposed. Nobody discovers that until a claim.
How it interacts with the indemnity and casualty clauses
The insurance article never stands alone. Three provisions have to be read together or they contradict each other.
A broad indemnity can swallow the waiver. If the tenant indemnifies the landlord for all claims arising from the premises, and separately waives subrogation for insured property losses, a landlord's insurer will argue the indemnity survives the waiver and gives it a contractual route to the tenant that the negligence route no longer offers. Well drafted leases say expressly that the indemnity is subject to the mutual waiver.
The casualty clause then decides what happens to the tenancy itself after the loss: who rebuilds, on what timetable, whether rent abates, and who can terminate. The waiver decides who pays and who cannot be sued. A lease record that captures one without the other answers only half the question a risk manager will ask. And where there is a guaranty, check whether the guarantor's obligations are drafted broadly enough to reach a loss the waiver was supposed to close out.
What to abstract from the insurance section
Insurance is one of the sections most often reduced to a single yes or no in a lease record, and that is not enough to answer any real question later. These are the fields worth capturing, and they all sit in the clause language rather than in a number you can copy across.
| Field | What to record | Why it gets asked about |
|---|---|---|
| Waiver of subrogation | Present or absent, mutual or one-sided, and the clause reference | The first question after any insured loss between the parties |
| Scope of the waiver | Premises only, or the whole building and common areas | Multi-tenant losses rarely stop at the demised premises |
| Negligence carve-out | Whether the waiver applies regardless of fault | A waiver that excludes negligence fails in the case you bought it for |
| Required coverages and limits | Each policy type, its limit, and who must carry it | Limits are the number a lender or auditor asks for first |
| Additional insured and primary wording | Who must be named and on which policy | Travels with the waiver and is routinely promised but not delivered |
| Certificate delivery obligation | Deadline, renewal cadence, notice of cancellation terms | This is the recurring task the whole article depends on |
Every one of those is prose, not a figure, which is precisely why insurance terms are the first thing dropped from a rushed lease record. Pulling them consistently across a portfolio is the kind of work lease data extraction software is built for: upload the executed lease with its amendments, and the insurance fields come back with the clause reference behind each one, so the answer to "does this lease have a mutual waiver" takes a click instead of a file search. The wider clause set is on our key clause extraction page, and commercial lease key terms covers the rest of what belongs in a record.
The short version
Put a mutual waiver of subrogation in every commercial lease, make it apply regardless of negligence, extend it to the whole building rather than just the premises, make the indemnity expressly subject to it, and require both parties to carry policies that permit it. Then verify the endorsement on the certificate, every renewal, rather than assuming it. The clause costs nothing to negotiate at signing and it is the difference between one insurance claim and two lawsuits.