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Hammer Clause

The hammer clause, also referred to as a consent to settlement provision, a settlement cap provision or a blackmail clause, is an insurance policy clause that is used by an insurer to force the insured to settle a claim in a suit.

The clause will offer the insured the option to waive the right to contest the insurance company’s decision on the settlement amount, in exchange for being able to settle the claim quickly, without the need to go to court and prolong the case.

The wording of the hammer clause will inform the insured that if they don’t agree to what the insurance offers, they will have the burden of proof to prove in court that the amount offered by the insurer is wrong or unjust.

The hammer clause will put pressure on the insured to accept the settlement amount offered by the insurer and end the case. However, some insurers try to put a monetary cap on the amount agreed to by the insured in a hammer clause, as a safeguard.

In general, hammer clauses are written in such a way to protect both the insurer and the insured from getting involved in a costly court case. These clauses could potentially save thousands of dollars in court fees while attending hearings, preparing the case and other charges.

For example, a hammer clause could inform the insured that if they do not agree to the amount of the settlement that the insurance company has presented, they will be responsible for their own legal fees to go to court and fight the case. This would put the insured in a difficult position, since they may not be able to pay these fees.

The hammer clause has many advantages and some disadvantages depending on the situation. In some cases, the insurer may use this clause to lowball the insured and settle for an amount lower than what the insured would actually have received if the case had gone to court. In other cases, the insured may agree to a settlement that would be better for their interests than having to go to court.

Ultimately, the hammer clause is a legal document that should be carefully considered before agreeing to it. The insured should ask questions to fully understand the implications of the clause and the settlement amount being proposed. As long as the insured knows the details of the clause, they should be able to make an informed decision as to whether or not to agree to the settlement.

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