Dental Professional Insurance Program

Consent to Settle Provision

OCTOBER 25, 2024

A Consent to Settle Provision in medical professional liability policies gives the insured the right to approve or reject settlement offers. This provision ensures that the insurance company must obtain the insured’s written consent before settling a claim, allowing the insured to protect their reputation by rejecting settlements they deem unreasonable.

Alternatives to a Consent to Settle Provision:

1. No Consent Provision: Some policies may not include a consent-to-settle provision, allowing insurers to settle claims without the insured’s input.
2. Hammer Clause: This clause can vary:
   • Full Hammer Clause: If the insured rejects a settlement, they may be responsible for any additional defense costs and settlement amounts beyond the initial offer.
   • Modified Hammer Clause: The insurer will only pay up to the amount the claim could have been settled for, leaving the insured to cover any excess costs.
     These alternatives can significantly impact the insured, potentially leading to higher out-of-pocket expenses if they choose to reject a settlement.

Pros and Cons of Consent-to-Settle Clauses:

While it empowers the insured to protect their reputation, it also places significant responsibility on them. Here are a few considerations:

Pros:

• Control: The insured can reject settlements they believe are unfair or damaging to their reputation.
• Reputation Protection: Allows the insured to fight claims they feel are unjust, potentially preserving their professional standing.

Cons:

• Lack of Expertise: The insured may not have the necessary experience to make informed decisions about settlements.
• Financial Risk: Rejecting a settlement could lead to a court loss and higher financial liability than the initial settlement offer.

Balancing Control and Expertise:

• Consultation: Insured individuals should work closely with legal and insurance advisors to make informed decisions.
• Education: Understanding the implications of rejecting settlements and the potential outcomes can help in making better choices.

It’s a delicate balance between maintaining control and relying on the expertise of insurers.

As insureds consider coverage to suit their business needs, it is important to consider:

• Risk Management: Insureds should engage in proactive risk management practices to minimize the likelihood of claims.
• Policy Review: Regularly reviewing and understanding the terms of their insurance policy can help insureds make more informed decisions.
• Second Opinions: Seeking second opinions from independent legal or insurance experts can provide additional perspectives.