When disputes arise between Landlords and Tenants after a loss, the fight is rarely between the people who signed the lease. It’s between insurers, armed with subrogation rights.
Unlike additional insured clauses which are often misunderstood or unenforceable in residential leasing, a properly drafted waiver of subrogation is orthodox, effective, and widely accepted by Ontario Courts.
What Is Subrogation?
Subrogation is the insurer’s right to:
- Step into the shoes of its insured, and
- Sue a third party to recover amounts paid under the policy
Example:
- A Tenant’s contents are damaged by a fire
- The Tenant’s insurer pays the claim
- The insurer then sues the Landlord alleging negligence
The lawsuit may have nothing to do with the Tenant’s wishes. Once the insurer pays, the fight belongs to the insurer.
What a Waiver of Subrogation Does
A waiver of subrogation is an agreement, usually reflected both in the lease and the insurance policy—that:
The insurer will not pursue recovery against the other contracting party for insured losses.
In practical terms:
- The loss stays where the insurance placed it
- Insurer-on-insurer litigation is avoided
- Risk is allocated by contract, not hindsight
Courts consistently view this as risk allocation, not liability avoidance.
What a Waiver of Subrogation Does Not Do
A waiver of subrogation does not:
- Eliminate negligence
- Prevent lawsuits by injured third parties
- Cover uninsured losses
- Replace the need for Landlord insurance
- Protect against wilful misconduct or gross negligence
It simply limits who the insurer can sue after paying a covered claim.
Commercial Leases: Standard and Expected
In Ontario commercial leasing, waivers of subrogation are:
- Common
- Enforceable
- Often mutual
Commercial parties are assumed to:
- Understand insurance as part of the bargain
- Allocate risk deliberately
- Price insurance into rent and operating costs
Ontario Courts have repeatedly upheld this model, recognizing that insured losses should be resolved through insurance, not litigation.
Residential Leases (Ontario)
Under the Residential Tenancies Act, 2006 (RTA):
- The Landlord must insure the building
- The Tenant insures contents and personal liability
- Clauses shifting Landlord duties onto tenants are vulnerable
A waiver of subrogation fits comfortably within this framework because:
- It does not make the Tenant insure the landlord
- It does not reduce Landlord obligations
- It simply prevents the Tenant’s insurer from suing the Landlord
This makes waivers far more defensible than “additional insured” clauses in residential tenancies.
One-Way vs Mutual Waivers
One-Way Waiver (Tenant → Landlord)
- Tenant’s insurer waives subrogation against landlord
- Common in small residential settings
- Easier to obtain and administer
Mutual Waiver (Tenant ↔ Landlord)
- Both insurers waive subrogation
- Cleaner risk allocation
- Common in multi-unit residential, condos, and commercial properties
Courts tend to favour mutual waivers because they reflect balance rather than overreach.
Drafting: Where Most Waivers Fail
A waiver of subrogation only works if three things align:
- The lease requires it
- Vague references to “insurance” are not enough
- The policy is endorsed
- Certificates of insurance do not create rights
- The endorsement must expressly waive subrogation
- The waiver is limited to insured losses
- Overbroad waivers invite enforceability problems
Best practice language often includes:
“to the extent permitted by the insurer”
That phrase keeps the clause reasonable and defensible.
What the Courts Have Said
Ontario Courts (and the SCC) have consistently recognized that:
- Parties may allocate risk through insurance
- Waivers of subrogation are enforceable
- Insured losses belong with insurers, not lawsuits
Cases such as Ross Southward Tire Ltd. v. Pyrotech Products Ltd. and Agnew-Surpass Shoe Stores Ltd. v. Cummer-Yonge Investments Ltd. reflect this long-standing principle.
While not residential-specific, the logic applies cleanly to residential leasing when RTA boundaries are respected.
Common Misconceptions
“A waiver protects me from being sued.”
No. It only protects you from subrogated claims by insurers.
“A certificate proves the waiver.”
No. Only the endorsement matters.
“Waivers replace landlord insurance.”
Absolutely not.
Considerations
For Ontario landlords:
✔ Waivers of subrogation are enforceable
✔ They work in both commercial and residential contexts
✔ They respect the RTA’s risk allocation model
✔ They reduce insurer-driven litigation
They are one of the most effective and least understood tools in a lease.
Brian Madigan LL.B., Broker
www.OntarioRealEstateSource.com