The Hammer Clause - Not What You Think

"Doctor, Lawyer, Indian Chief" - Besides being the name of a popular song from 1945, what do these occupations all have in common?  Each requires that the individual with the title possess a special skill holding them to a higher standard of conduct.  They are considered professionals.  Plumbers, programmers, carpenters...the category of professional has evolved.

If allegations arise that one of these individuals failed to render services of a professional nature, their business liability policy, sometimes referred to as a Commercial General Liability (CGL) policy, will not respond.  Professional liability is excluded under CGL policies.

The astute professional carries a professional liability policy in addition to his CGL.  Professional liability insurance, also referred to as malpractice insurance, will protect the professional when allegations of errors or omissions in professional services arise.  But you knew that.

What you may not know is that many professional liability policies contain an unusual clause, known as the "hammer clause".  The hammer clause requires the insurer to seek the insured's approval prior to settling a claim for a specific amount.  Some professionals believe that settling claims out of court is an admission of error that may harm their professional reputation.  So the hammer clause appears to be a great way for the professional to have the final say before settling a suit that they deem frivolous or unsubstantiated.

However, what many professionals fail to realize is that if they do not approve the recommended settlement, the hammer will fall.  You see, the hammer clause goes on to say that the insurer will not be liable for any additional monies required to settle the claim or for the defense costs that accrue from the point that the insurer makes the settlement recommendation.

An example will demonstrate the point.  Dr. Smith has a $5 million limit on his professional liability policy.  His insurance adjuster/lawyer recommends that a settlement be reached in a malpractice claim for $500,000.  Dr. Smith refuses and wants the case to proceed to trial.  Any defense costs from that point on, as well as any settlement over $500,000, will not be paid by the insurance company.  Talk about putting the hammer down!

The 1945 song goes on:  "Tell the doc to stick to his practice; Tell the lawyers to settle his case.".  My interpretation, always work with an insurance professional who can explain these important policy provisions to you.  That way, you won't get hammered. 

No Need to Fear, Underdog is Here!

Did you know that are approximately 70 million pet dogs in the US?  How many four-legged family members does your family have?  Remember when the "responsibility" discussion ensued about getting a dog?  What did you, as the responsible adult, make your child do to prove that he or she was "ready" for pet ownership?

• Walk the neighbor's dog for a month
• Write an essay explaining how responsible he or she is
• Obtain One Million "Likes" on Facebook (seriously - and these enterprising kids did it!)

Sooner than later, your newest family member, in the form of a lovable pooch, arrived. Within a few weeks, the parental unit was walking the dog while Junior was working his thumbs on a mobile device.  So much for teaching Junior responsibility, but what about your responsibility as a pet owner?

It may be a surprise to you that dog bites accounted for more than 1/3 of all homeowner claims in 2011, with the average claim totaling close to $30,000!

Yes, if Fido "accidentally" nips the neighbor's toddler and injury results, you could very well be sued for medical bills, pain and suffering and the like.  If Rover gets loose and bites someone else's dog, you could find yourself paying for vet bills.  "There's no need to fear.  Underdog is here!"  That is assuming you have a home / renters / condo policy.  The "underdog" of coverages on your policy that I am referring to is "Coverage E - Personal Liability".

Personal liability will defend you, even if the suit is groundless, false or fraudulent.  This inexpensive coverage can be increased up to a $500,000 limit for an additional premium of usually less than $30 per year.

This coverage is not limited to dog bites.  If you or family members are sued for many types of bodily injury or property damage claims, underdog "Coverage E", can rescue you. Talk to your Trusted Choice agent for more details.

There is one more thing to keep in mind regarding your dog.  Injuries caused by your dog will automatically be covered by your home insurance in most situations.  Some insurance companies, however, do have a "restricted" list of dogs that they do not want to cover on the home policy.  These breeds are perceived to have aggressive tendencies. Other insurance companies define what dogs are "restricted" from coverage based on behavior; i.e. biting history.  Be sure to discuss your pet honestly with your insurance company.

Be a responsible dog owner.  Train your dog.  Take necessary precautions with your dog around neighbors and visitors.  Finally, armed with your insurance policy, you can have no fear, underdog is here.