Discrepancies can often cause far more problems than most people realize. When someone in charge of making important decisions for your business creates a problem through commonplace errors, you need to make sure your insurance is ready for whatever is in store. Having solid D&O insurance is crucial for your company to survive the mistakes made by directors, officers, and those who usually sit in positions of power within the organization. Though straightforward, there are some angles you might not have considered.
What Is a Hammer Clause?
One area that can seem confusing is a hammer clause. Essentially, a hammer clause in D&O insurance gives the insurance provider a “cap” on the amount that will be compensated. If the settlement is not worth as much as the claim suggests, for example, the insurer can invoke the hammer clause to offer what the organization believes to be an appropriate amount. The clause will always be within the contract, meaning it will not be a surprise for those who understand their policies. Other points to focus on with D&O insurance includes:
- Reduction of amount owed in settlement
- Incentive for finalization of settlement terms
- Finding agreeable compromises
Examine Your D&O Policy
By looking at the bigger picture with your D&O coverage, you can get the most out of your plan. Take time to review your options and get a better idea of which clauses you need to pay attention to at all times.