West Virginia Adjusters Practice Exam

What does 'waiver of subrogation' refer to in an insurance context?

1. A clause allowing insurers to sue negligent third parties

2. A clause preventing the insurer from seeking recovery

3. A type of rider in a homeowners policy

4. A practice that reduces insurance premiums

The correct answer is: A clause preventing the insurer from seeking recovery

In the context of insurance, 'waiver of subrogation' refers to an agreement or clause that prevents the insurer from pursuing recovery against a third party that may have contributed to a loss covered by the insurance policy. Essentially, this provision is designed to protect the policyholder from being pursued for damages by the insurer, following a claim for which the insurer has paid out benefits. When a waiver of subrogation is in effect, the insurer relinquishes its right to step into the shoes of the policyholder to seek reimbursement from responsible third parties. This is often utilized in various types of liability insurance situations to foster smoother business relations, as it removes the potential conflict between the policyholder and third parties regarding liability issues. This makes the provided answer correct, as it accurately captures the essence of what a waiver of subrogation entails in insurance agreements, highlighting its protective role for the insured party.