The division is « the principle that an insurer that has paid a loss under an insurance policy is entitled to all rights and remedies available to the insured against a third party in respect of damage covered by the policy. »  In other words, if a party suffers a loss and that loss is covered by insurance, the insurer covering that loss can « follow in the footsteps » of the party who suffered the loss and make a claim against a third party to recover the amount paid by the insurer for the loss. In a commercial lease, this situation could be as follows: the tenant would carry property insurance and the property would suffer damage. The damage would be covered by the tenant`s property insurance, but the tenant`s insurer would then « follow in the tenant`s footsteps » and attempt to recover the cost of the damage from the landlord, whether the landlord is guilty or responsible for the loss. The landlord would then have to defend himself against the insurance and prove that the landlord is not responsible for the damage. In this scenario, the landlord may face a long, costly, and complex legal battle with the tenant`s insurance company, even though the landlord may not be at fault. Is this explicit waiver necessary? Before an explicit waiver of corogation became commonplace, some courts felt sorry for tenants who faced a surprising lawsuit by the landlord`s insurer to recover the amounts paid by the insurer from the tenant in order to reimburse the landlord for the damage the tenant had negligently caused to the building. The courts have argued that if the lease clearly requires the landlord to keep the insured building, this required insurance should also be in favour of the tenant, making that tenant a co-insured and depriving the insurer of its right to pursue the recovery of the proceeds from the tenant. Since the insurer could not recover from a co-insured and the tenant was co-insured, the insurer`s claim rights for the tenant were considered tacit. See Ann Pedro Cargile, « Implied Waivers of Subrogation in Leases, » 12 Probate & Property 22 (Jan. 1998).
Indeed, in many cases, a lessor or tenant may choose to remove from the lease the specifics of the other party`s non-life insurance and simply require that party assume responsibility for the insurance of its own property, waive any claim for loss or damage to property against the other party (with details) and the rights of its insurer to pass its claim on the other party waives. The default receivables transfer clause allows you to waive your transfer rights before a loss occurs. This allows you to sign a contract in which you agree to waive your right to sue another party for losses that may arise in the future….