What is a "waiver of subrogation"?

A "waiver of subrogation" refers to an agreement where the insurer gives up its right to pursue compensation from a third party after it has paid a claim to the insured. This is often included in contracts or agreements where the insured might be at risk of loss due to another party's actions. For example, in construction contracts, a waiver of subrogation can prevent an insurance company from holding contractors or subcontractors liable for damages, ensuring that the focus remains on risk management and collaborative work, and fostering better relationships among parties involved.

By waiving subrogation rights, the insurer avoids pursuing claims against these third parties, which can streamline claims processes and mitigate potential legal disputes. This facilitates smoother operations, especially in industries where partnerships are key to business success.

In contrast, other options such as increasing premiums without notice, mandating coverage for specific losses, or formal requests for policy exemptions do not pertain to the fundamental concept of subrogation and its waiver, as these are distinct aspects of insurance policy terms and functions.