by: Ali Larson, Executive Risk Specialist at WA Group.
Executive Risk Policies
Today we’re going to talk a little bit about a settlement clause also known as the “Hammer Clause” in Executive Risk Policies. You’ll find these clauses in the Directors and Officers policy and Employer Practices Liability policies. Almost every single Executive Risk policy has these Settlement or Hammer clauses in them. What this means is how much money you end up paying or how much money the insurer ends up paying in the event of a claim.
Typically, what these clauses look like is 80/20 or 90/10 or sometimes they’re even deleted. What it is, is basically co-insurance.
For Example
If you have a claim and the insurer ends up wanting to settle and you have, for example, an 80/20 settlement clause, the carrier will say if you don’t want to settle, we will pay 80% over and above our initial settlement offer and you will be responsible for the 20%. If it’s a 90/10 settlement clause, they’ll pay 90%, you pay 10% or in some cases, that settlement clause is completely deleted and you don’t pay anything and the carrier ends up paying the total over and above the initial settlement offer.
Any time you see a settlement clause that’s below 80/20, so for example 70/30 or 60/40, we definitely want to have that amended to either be completely deleted or improved upon to 80/20 or 90/10.
If you have any questions about any Executive Risk type lines of coverage or anything about your policies, feel free to give WA a call and we’d be happy to answer your questions. Thanks for tuning in, have a great day.
Watch Ali Discuss This…
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