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Hammer Clause---Consent To Settle


Pure Consent to Settle vs. Hammer Clause:

Do you understand the language regarding a claims settlement in your malpractice policy? It's important you do because it may have significant ramifications on your career.


What's the Difference?

Understanding your consent provisions is important because settling your claim may not be the best resolution for you. Your policy's language will provide details on whether you have input in your own defense… and to what extent.


Be aware that settlements can involve more than money. In fact, they can impact many aspects of your career, including license to practice, reputation, and future insurability. Understanding the differences in consent provisions will help you to know your rights if you disagree with your insurance company's desire to settle a claim. That's why most orthodontists want to weigh in on the final decision.


For this reason, make sure you know whether your malpractice policy gives you the exclusive right to settle—because many do not.


The Hammer

Most malpractice insurance policies retain the right to settle any claim at the insurance company's discretion and may include a hammer clause. Though there are many variations to this type of clause, the language limits your rights to settlement. Under this clause, the insurance company will not pay more than they deem fair. Should you choose not to settle a claim, they cease payment of defense costs and only pay up to the insurance company's advised settlement amount, leaving you with what can be an expensive bill.


Pure/True Consent

This type of clause has no strings attached. It states an insurance company must have your approval on any settlement.


Be aware some companies say they provide consent to settle, but there may be exceptions which could limit your rights to defend the case. Again, any consent to settle that does not require your approval can leave you paying significant expenses. If there are any exceptions, the malpractice policy is not pure consent.



Other Language

Many professional liability policies offer binding arbitration. Like a hammer clause, these policies do not allow you to decide whether to go to court. Instead, this requires a resolution by an impartial party. This decision is usually based on finding an agreement that appeases both sides and requires compromise.


Exclusive Right to Settle

AAOIC's Malpractice policy entitles you to exclusive settlement rights, which is also known as a pure/true consent to settle. The policy language literally reads: We will not settle any claim or suit without your consent.


For more information on professional liability policies, check The Orthodontists' Guide to Malpractice Insurance. Or contact one of our specialists at 800.622.0344 to better understand why AAOIC's malpractice policy was Created for Orthodontists, by Orthodontists®.