Which term is a pre-event arrangement that prevents an insurer from seeking recovery from a third party after a claim?

Which term is a pre-event arrangement that prevents an insurer from seeking recovery from a third party after a claim?

• A. Waiver of Subrogation
• B. Transfer of Financial Responsibility
• C. Subrogation Release
• D. Third-Party Recovery Waiver

Answer: (D)

The main idea here is to understand subrogation—the insurer’s right to recover costs from the party at fault after paying a claim. A pre-event arrangement that stops that recovery is described by the term that explicitly states a waiver of the insurer’s right to pursue a third party. This is called a third-party recovery waiver, wording that emphasizes agreeing in advance not to seek reimbursement from the third party if a loss occurs. Such a waiver keeps the relationship between the insured and the other party intact and avoids post-loss recovery actions by the insurer. In practice, this is the best way to describe the pre-loss restriction on subrogation rights: the insurer agrees not to pursue a third party after a claim is paid. Other phrases touch on related ideas—like a standard waiver of subrogation, or a release of subrogation rights after a loss—but the option that matches the pre-event waiver of recovery against a third party is the third-party recovery waiver.

The main idea here is to understand subrogation—the insurer’s right to recover costs from the party at fault after paying a claim. A pre-event arrangement that stops that recovery is described by the term that explicitly states a waiver of the insurer’s right to pursue a third party. This is called a third-party recovery waiver, wording that emphasizes agreeing in advance not to seek reimbursement from the third party if a loss occurs. Such a waiver keeps the relationship between the insured and the other party intact and avoids post-loss recovery actions by the insurer.

In practice, this is the best way to describe the pre-loss restriction on subrogation rights: the insurer agrees not to pursue a third party after a claim is paid. Other phrases touch on related ideas—like a standard waiver of subrogation, or a release of subrogation rights after a loss—but the option that matches the pre-event waiver of recovery against a third party is the third-party recovery waiver.