Efficient And Effective Business Litigation

‘Consent to settle’ and ‘hammer’ clauses

On Behalf of | Jun 13, 2022 | Health Care Law |

California insurance companies and doctors know the importance of having a strong medical malpractice insurance policy. A medical malpractice claim can result in insurance companies paying out significant amounts through either settlement or litigation, while it can destroy a doctor’s reputation and business.

What is a consent to settle clause?

A consent to settle clause is essential in a medical malpractice insurance policy. This clause states that an insurance company cannot settle a medical malpractice claim without the consent of the doctor; however, a doctor may not unreasonably withhold consent.

Situations may arise where the insurance company wants to settle to avoid potentially paying out a larger sum if the case goes to trial, but a doctor won’t give consent out of fear of ruining their professional reputation.

What is a hammer clause?

Adding a hammer clause can help an insurance company avoid paying out more money if a doctor refuses to consent to a settlement. A hammer clause states that if a doctor won’t consent to settlement, resulting in a higher settlement or judgment amount, the insurance company will only need to pay the initial proposed settlement amount.

Another option is to include language in a hammer clause stating that if a doctor does not consent to a settlement amount, the ultimate amount paid out will be shared equally by the insurance company and the doctor.

Insurance policies should be written after careful consideration and with extreme attention to detail, especially when it comes to major decisions that could affect how much must be paid out.

The decision to settle, and on what terms, is never simple. Consent to settle and hammer clauses give insurance companies the ability to avoid costly and lengthy litigation, and guidance from experienced professionals can help with deciding to settle or defend a claim through litigation.