Category: Claims handling · Reviewed by Matt Bartlett, Director · Founder · Last reviewed 2026-06-11
A non-waiver agreement is a bilateral contract between insurer and policyholder under which both parties agree that the insurer’s conduct in investigating, defending or paying part of a claim does not waive its coverage defences, and that the policyholder will not argue waiver, election or estoppel.
The non-waiver agreement is the contractual counterpart of the reservation of rights letter. A reservation is the insurer’s unilateral statement; a non-waiver is the bilateral acknowledgement. Where the coverage issues are significant or the defence is likely to be long and costly, a non-waiver puts the insurer’s position on a stronger footing because the policyholder has expressly accepted the basis on which the insurer is acting.
The instrument is most commonly used in directors and officers liability, professional indemnity and complex commercial claims where the insurer’s defence costs may run into millions before coverage is finally determined. Without a non-waiver, the policyholder might later argue that the insurer waived its coverage defences by funding defence; with a non-waiver, that argument is contractually foreclosed.
Non-waivers are creatures of contract. They are enforceable on ordinary contract principles, subject only to the usual constraints (consideration, capacity, no misrepresentation, no unconscionability). The agreement typically provides that:
The English authorities on waiver and election emphasise that a clear and unequivocal communication is required for waiver to operate. Motor Oil Hellas (Corinth) Refineries SA v Shipping Corporation of India [1990] 1 Lloyd’s Rep 391 (the Kanchenjunga) is the leading statement of the doctrine. A non-waiver agreement is therefore both belt and braces — it ensures that no inference of waiver can be drawn, and it gives the insurer a direct contractual cause of action if the policyholder later attempts to argue otherwise.
The FCA Consumer Duty (PRIN 2A) limits the use of non-waivers with retail policyholders. A consumer who is asked to sign a document waiving substantive rights without independent advice may have a strong argument under the unfair contract terms regime (Consumer Rights Act 2015 Part 2) and under PRIN 2A.4 (firms must support consumers’ understanding). Most insurers reserve non-waiver agreements for commercial clients with their own legal advice.
A typical non-waiver runs to four or five pages. It identifies the policy, the claim and the parties. It records the insurer’s coverage concerns in factual rather than legal terms (so as not to give the policyholder an outline of the coverage defence to be deployed later). It sets out the insurer’s commitment to fund defence costs (often subject to a cap, a periodic review, or both) and the policyholder’s obligations to cooperate (provide documents, attend interviews, sign witness statements, give consent to settlements).
The agreement typically allocates control of the defence. In English practice the panel solicitor is usually treated as acting for the policyholder, but is funded and managed by the insurer; the non-waiver may formalise that arrangement. The agreement also typically addresses privilege: the policyholder may instruct independent coverage counsel and communications with that counsel are not to be disclosed to the insurer.
Operationally, the non-waiver is negotiated within the first 60 to 90 days of the claim and signed before substantial defence work is undertaken. It is reviewed periodically, particularly when material new information emerges or when the case enters a new procedural phase (issue of proceedings, exchange of pleadings, JSM, trial).
A common drafting pitfall is to omit a clear termination clause. Without one, the parties are locked into the arrangement even if the relationship breaks down. A 30-day termination right with appropriate consequences (no recovery of defence costs already paid by insurer to policyholder’s panel solicitor; insurer free to decline cover formally) is standard.
A “full non-waiver” covers all defence and indemnity issues. A “limited non-waiver” covers only specified issues. A “partial-payment non-waiver” allows the insurer to make payments on account against the eventual indemnity without waiving coverage — common in property losses where interim payments are needed.
A “joint defence agreement” extends the non-waiver framework to multi-party defences (multiple insureds, multiple insurers, the policyholder and the reinsurer). These are particularly common in D&O claims with multiple directors as co-defendants.
A “tolling agreement” is sometimes signed alongside a non-waiver, freezing any limitation defences either party might have against the other while coverage is investigated. This avoids the policyholder having to issue a claim form against the insurer purely to protect its position.
A FTSE 250 company faces a regulatory investigation that triggers its D&O tower. The primary insurer has £15m of cover; the excess insurers attach above. There are two contested coverage issues — whether the investigation is a “claim” within the policy definition, and whether a conduct exclusion bites. Within 45 days of notification the company signs a non-waiver with the primary insurer providing for the insurer to fund up to £3m of defence costs on a without-prejudice basis, with quarterly review, no waiver of either side’s rights, mutual termination on 30 days’ notice, and provision for the company to instruct independent coverage counsel at its own cost. The excess insurers sign equivalent non-waivers as the tower attaches. Eighteen months later the coverage dispute is resolved at a coverage arbitration in favour of the policyholder; the £3.4m of defence costs paid under the non-waiver are treated as part of the insurer’s indemnity. Without the non-waiver, the policyholder would have spent six months disputing the conditions on which the insurer would fund anything at all.
By Matt Bartlett, Director, on 2026-06-11. Next review: 2026-12-11.
This entry is part of the Apex Insurance Wiki. Last reviewed by Matt Bartlett on 2026-06-11. Apex Insurance Brokers Limited, FCA FRN 724952, Companies House 07014570. Not regulated advice — consult your broker on your specific position.
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