ASHRM CPHRM Exam - Topic 1 Question 8 Discussion

Subrogation is the insurer's right to seek recovery from a responsible third party after paying a loss. A waiver of subrogation clause means the insurer (or self-insured entity) gives up that recovery right, usually to support business relationships and reduce litigation between contracting parties. Risk financing objectives include understanding when waivers are acceptable (balanced against increased retained loss), ensuring the waiver aligns with insurance policy endorsements, and preventing unintended coverage gaps. Poorly managed waivers can shift costs back onto the organization and complicate recovery efforts. Contracts should be reviewed to ensure the waiver is mutual when appropriate and consistent with the organization's risk appetite and insurance program.