Which statement best defines a subrogation waiver?

• A. A subrogation waiver increases premium to cover third-party claims.
• B. A subrogation waiver prevents the insurer from seeking recovery from a third party; used in contracts or partnerships where pursuing recovery would be obstructive.
• C. A subrogation waiver transfers liability to the policyholder.
• D. A subrogation waiver eliminates the insured's obligation to report losses.

Answer: (B)

A subrogation waiver is an agreement in which the insurer gives up its right to pursue recovery from a third party after paying a claim. This is chosen because it directly reflects the purpose of subrogation—the insurer stepping into the insured’s shoes to reclaim costs from the at-fault party—and waiving that right means the insurer will not pursue those third-party recoveries. Such waivers are commonly used in contracts or partnerships where pursuing recovery would complicate relationships or hinder business. The other statements don’t fit because subrogation waivers do not change premium calculations, do not transfer liability to the policyholder, and do not remove the insured’s obligation to report losses.