What is the function of a "waiver of subrogation" clause in an insurance policy?

A "waiver of subrogation" clause in an insurance policy serves to prevent the insurer from pursuing recovery from a third party after compensating the insured for a loss. When an insurer pays a claim to the insured, it typically has the right to "subrogate," meaning it can seek reimbursement from any responsible third parties. However, when there is a waiver of subrogation in place, the insurer gives up this right and cannot take legal action against those third parties.

This clause is particularly important in business relationships where parties might have contracts that require them to maintain their own insurance and agree not to seek reimbursement from each other. By including a waiver of subrogation, a company can ensure that its insurers will not try to recover losses from its partners or clients after a claim has been paid, thereby fostering better working relationships and reducing potential conflicts over claims.