Legal Definitions - nonwaiver agreement

A nonwaiver agreement is a formal contract between an insurance company and its policyholder. It allows the insurer to take actions related to a claim—such as investigating the incident, assessing damages, or even providing a legal defense—without giving up its right to later deny coverage for that claim. This agreement is crucial when there's a question about whether a claim is actually covered by the policy, as it prevents the insurer's initial helpful actions from being interpreted as an admission that coverage exists.

Here are a few examples to illustrate how a nonwaiver agreement works:

• Scenario 1: Questionable Auto Accident Coverage

  Imagine Sarah gets into a car accident. She has a personal auto insurance policy, but at the time of the accident, she was using her car to deliver food for a paid service. Her personal policy likely has an exclusion for commercial use. The other driver involved in the accident is threatening to sue. Sarah's insurance company wants to investigate the accident immediately to gather evidence and potentially defend her, but they don't want these actions to imply they will cover the claim if it turns out she was indeed engaged in commercial activity.

  How a nonwaiver agreement applies: Sarah signs a nonwaiver agreement. This allows her insurer to investigate the accident, interview witnesses, and even appoint an attorney to represent her in the initial stages of a lawsuit. However, by signing the agreement, Sarah acknowledges that these actions do not mean the insurer has agreed to cover the claim, and they still retain the right to deny coverage later if their investigation confirms the commercial use exclusion applies.

• Scenario 2: Business Liability with Late Notice

  A small manufacturing company, "Widgets Inc.," is sued by a customer claiming injury from a faulty product. Widgets Inc. notifies its general liability insurer, "SecureSure Insurance," about the lawsuit several months after they first became aware of the defect. Their insurance policy requires "prompt notification" of any potential claims. SecureSure wants to investigate the product defect and the lawsuit's merits to understand the potential financial exposure, but they are concerned that the late notice might be a valid reason to deny coverage.

  How a nonwaiver agreement applies: SecureSure asks Widgets Inc. to sign a nonwaiver agreement. This agreement allows SecureSure to proceed with investigating the product, interviewing employees, and engaging defense counsel to protect Widgets Inc.'s interests. However, it explicitly states that SecureSure is still reserving its right to later deny coverage based on the late notification, should they choose to do so after their full investigation.

• Scenario 3: Homeowner's Claim with Suspicious Circumstances

  Mr. Chen files a claim with his homeowner's insurance for significant fire damage to his garage. While the insurer needs to send adjusters to assess the damage and secure the property promptly, their initial review of the circumstances raises some questions about the fire's origin, which could potentially fall under an exclusion for intentionally caused damage. They need to act quickly to prevent further loss but don't want to waive their right to deny the claim if foul play is confirmed.

  How a nonwaiver agreement applies: Mr. Chen signs a nonwaiver agreement. This permits his insurer to immediately send contractors to secure the garage, prevent further damage, and begin a detailed investigation into the cause of the fire. The agreement ensures that these necessary steps to mitigate loss and gather information do not prevent the insurer from denying the claim later if their investigation reveals the fire was intentionally set, which would be excluded under the policy.