Hammer clause

Hammer clause is an clause in the insurance policy that allows insurer to force insured into some action, usually to settle a claim. In the insurance policy there can be set a cap that indicates maximum compensation. It can be limited to the value of insured goods assessed by the insurer. The insured can disagree, but in that case he/she may have to cover defense costs.

The hammer clause is usually used when insurer is required to represent insured in court. If the insurer finds that settlement can be cheaper than long process, he can suggest such a solution. If the insured doesn't agree, he can be required to cover some costs of the defense. The level of costs depends on the hammer clause. It an be e.g. 50-50 or 70-30.

The term hammer clause is used sometimes to indicate much higher power of on side of the contract.

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