Hammer Clause
Definition. A Hammer Clause gives the insurer the right to settle a claim against the insured's wishes — limiting the insurer's exposure if the insured refuses a reasonable settlement.
Also known as: Insurer's Right to Settle
Common in Professional Liability and Cyber policies. If you refuse to settle at the insurer's recommended amount, your subsequent defense costs + any larger settlement become YOUR responsibility above the recommended-settle figure. Consent-to-Settle clauses are the opposite mechanic.
Sources cited
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Reviewed by California-licensed Property & Casualty insurance agent
Jason Wootton (CA License #0I94454). Not insurance advice, an individual recommendation, or a solicitation in any state. Insurance regulations vary by state. For specific coverage decisions, consult a licensed insurance agent in your state.
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