Hold Harmless

What is the difference between a hold harmless agreement and waiver of subrogation?

“Hold harmless” is a legal term sometimes inserted into an agreement which asserts that one party will not try to sue or blame the other for liability rising from a third party. The purpose of a “hold harmless” agreement is not to shield a party from all liability, especially not from its own actions in claims brought by the other party. Instead, the hold-harmless provision prevents one party from suing the other in response to a claim by an outside party. For example, Sue O’s Moving Company leases her warehouse space from Sandy Q. Property Management and the lease agreement between Sue O’s Moving Company and Sandy Q. Property Management includes a hold harmless agreement. Marilyn G. is a shipper looking for a quote on her move from Roseville to Napa and stops by Sue O’s Moving Company to arrange an estimate. Marilyn trips and falls in the office of Sue O’s Moving Company and files a claim against Sue’s insurance policy with MOVER’S CHOICE. Since there is a hold harmless agreement in the lease between Sue O’s Moving and Sandy Q Property Management, Sue O’s Moving Company cannot hold Sandy Q. Property Management liable unless Sandy Q. is grossly negligent or intentionally fails to perform according to the terms of the lease agreement. The hold harmless is part of the contact drawn between the leasee and lessor and the wording is not made part of the MOVER’S CHOICE policy.

A waiver of subrogation is more often used in insurance contracts but may also be used in business agreements. The definition of subrogation is the right to pursue someone else’s claim. A waiver of subrogation is an endorsement to the insurance policy that requires one party on the contract to waive their right to sue for and recover damages from the other party. Since the first party’s right to recover from another party was waived, then the first party’s insurer’s right to recover damages from the other party may also be waived, even if the insurer pays the loss. For example, Casey’s Moving & Storage is hired to do an office move in Rita G. Towers in downtown San Francisco. Rita G. was supposed to have placed rubber mats on the floors but failed to do so. One of the employees of Casey’s Moving & Storage slips and falls on the slippery floor and files a Workers Comp claim under the policy for Casey’s Moving & Storage. If Casey’s Workers Comp provider had issued waiver of subrogation to Rita G. Towers, then Casey’s policy will be responsible for the claim and cannot subrogate against Rita G. Towers even though they hold some responsibility for the accident by failing to lay out the rubber mats. If no waiver of subrogation was issued to Rita G. Towers, then the Workers’ Comp carrier for Casey’s Moving Systems will settle the claim and subrogate against the insurance carrier for Rita G. Towers to recover damages.

MOVER’S CHOICE will not authorize use of a hold harmless agreement because it is not a file and approved policy form. MOVER’S CHOICE typically handles requests for a hold harmless agreement by issuing a standard additional insured endorsements or the blanket additional insured endorsement with a waiver of subrogation to meet the appropriate transfer of liability.