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The purpose of the hammer clause in workers’ comp

On Behalf of | Nov 17, 2021 | Workers' Compensation

A hammer clause is a rule in New Jersey that allows an insurance company to force an insured policyholder to settle a claim. It is also called a blackmail clause because it is often seen as unfair to the insured party. When you have a workers’ comp case open, it is important to decide whether or not to take advantage of a hammer clause.

The meaning of a hammer clause

The hammer clause is a settlement cap provision. The insurance company is given the power to force an insured person to settle a claim. The insurer must determine the settlement’s value and cap the amount of indemnification. The insured has the right to refuse a settlement or suggest a different value.

The hammer clause allows the insurer to decrease the amount of money they owe the insured in a settlement. They have a reduced obligation to carry out a settlement in which they are not satisfied with the amount.

When a hammer clause is needed

The hammer clause may be helpful to some workers’ comp recipients. They may want to avoid going through a long court trial and having to pay expensive legal fees. This clause is the faster, more convenient solution to avoid the complications of a full-length court case. However, it gives more control to the insurer and allows them to disregard the rights of the insured.

Determining when you need a condition

A hammer clause is a condition in an insurance contract in which the insurer can reduce the amount of money that is owed in a lawsuit. Essentially, the claim is settled for an amount that is specified by the insurer. This clause gives more control to your insurer if you file a claim for compensation.

However, you can settle a claim immediately when you initiate the hammer clause. Insured policyholders must decide if this type of provision is beneficial to them or not.