[H064]

hammer clause

An informal title for a provision that is a modification of a consent-to-settle clause. It requires the insurance company to secure the insured's permission to settle a claim or lawsuit. It allows the insured to have control over an action that could affect his or her reputation. However, if permission is not given, the typical clause usually caps any subsequent settlement at the amount the insurer originally sought to pay and/or it may limit or eliminate an insurer's obligation to continue to defend a lawsuit.