What does a ‘hammer clause’ mean for an architect/engineer in a professional liability policy?
A hammer clause is a clause that allows an insurer to settle a claim without the insured’s consent. Most insurance companies we work with do not have a hammer clause in their policy. It is common to have a hammer clause included if your firm has had several professional liability claims.
Here are some examples of the consent to settle clause with a few of the insurance companies we work with. These are not considered hammer clauses.
Example one:
The Company may settle or compromise any Claim as the Company deems expedient with the consent of the Named Insured, such consent not to be unreasonably withheld.
Example two:
The Insurer shall have the right to associate itself in the defense and settlement of any Claim that appears reasonably likely to involve this Policy. The Insurer may make any investigation it deems appropriate in connection with any Claim. The Insurer may, with the written consent of the Insured, settle any Claim for a monetary amount that the Insurer deems reasonable. The Insured’s consent shall not be unreasonably withheld.
Here is an example of a hammer clause:
The Insurer may make any investigation it deems necessary and may, with the Insured’s consent, such consent not to be unreasonably withheld, make any settlement of any claim it deems expedient.
If your firm does have a hammer clause you will not be able to have a say in the settlement amount the insurance company has agreed to.
Review your firm’s policy to understand if your firm has a hammer clause or not. If you have any questions about the hammer clause in professional liability policy please call, or email, your Professional Underwriter agent for assistance.