Med Mal Policy Features You May Feel Strongly About, Pt 1

Physicians Talking Outside by a Tree This is the first in a series of posts where we will be defining critically important med mal policy terms. As part of our Welcome Packet to new clients, we always include a quick word of advice to review the policy and know the main features of the policy. Many times, after doing this, physicians and caregivers then ask us to review and discuss in detail certain terms and features of the policy. Today we will discuss the Hammer Clause and how it impacts your policy. Most of the med mal terms and features that will be discussed in this series are primarily seen in surplus lines policies (vs. admitted carrier policies).

Hammer Clause. The first med mal policy feature that physicians and caregivers should be aware of is the Hammer Clause. The Hammer Clause allows insurance companies to decide if a claim should be settled, or if the physician does not want to settle and wishes to move forward with the claim, it allows the insurance company to set a limit of how much they will pay out. If your policy has a Hammer Clause and you have an open claim, and the insurance company believes that you will lose that claim and they are ready to settle, they will most likely invoke the Hammer Clause and put the burden of settling the claim back on you. The Hammer Clause states that the physician or caregiver is responsible for any payments above what the insurance company was willing to settle for, including defense costs. For instance, let’s say you are involved in an open claim and the insurance company is saying that you should settle the claim with the plaintiff and they have set aside $250,000 to settle the claim. However, you feel that the claim is baseless and you want the insurance company to continue to defend you. As the defendant in the claim, with a policy that has a Hammer Clause, you will be responsible for paying any award above $250,000, including defense costs.

It should be noted that most surplus lines companies will provide an option for the physician to pay to opt-out of the Hammer Clause and that it is always advisable to ask your agent about the options available. For instance, for an extra $500 per year (this amount can vary), you may be able to eliminate the Hammer Clause from the policy, so that you have a more standard policy. Regarding Florida med mal policies, it should also be noted that most policies from an admitted carrier also include a Hammer Clause. This is because the state (via the Florida Office of Insurance Regulation) wanted to regulate the claim process, so they gave the power of controlling the claim to the med mal company.

Still have questions about the Hammer Clause? Contact our med mal agents today at 1-866-824-0137. They’d be happy to answer your questions.

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