What might be a consequence of not having a subrogation waiver clause in an insurance contract?

Having a subrogation waiver clause in an insurance contract is critical because it defines the extent to which an insurer can reclaim costs from third parties after compensating the insured for a loss. If a subrogation waiver clause is absent, the insurer retains the right to recover expenses from third parties who may have been responsible for the loss. This means that the insurer can take legal action against those parties to recoup the amounts paid out under the policy.

When an insurer pursues subrogation, it can benefit the overall system by spreading the risk and costs more fairly among responsible parties. Without a waiver, the insurer's ability to seek recovery not only protects their financial interests but also offers an additional mechanism to hold liable parties accountable for their actions.

The other options lack relevance to the core function of subrogation. For instance, stating that the insurer cannot protect their rights (the first choice) misrepresents their rights under the contract; they retain those rights without a waiver in place. The idea that the policyholder will always be liable (the third choice) is misleading, as liability can depend on the circumstances surrounding each claim, and denying a claim altogether (the fourth option) does not necessarily follow from the absence of a subrogation waiver