Certain insurers offer deductible reductions when resolving a claim in arbitration or medication. Given the appropriate circumstances it can be a significant savings for the insured at claims time. For example, the current Wesco policy has a provision for reducing the deductible for mediation or arbitration by up to 50%:
C. Settlement
The Company shall have the right to negotiate a settlement or compromise of a claim as it deems appropriate but shall not commit to settlement of a claim without the written consent of the Named Insured. If the Named Insured refuses to consent to a settlement or compromise recommended by the Company and acceptable to the claimant, then the Company’s Limits of Liability under this Policy shall be reduced to the amount for which the claim could have been compromised or settled, plus all claim expenses incurred up to the time the Company makes its recommendation, plus fifty percent (50%) of the claim expenses incurred subsequent to the date of such refusal, which amount shall not exceed the remainder of the Limits of Liability specified in Section III. A.
If any claim covered under this Policy is resolved through the use of formal mediation within six months from the date it is first reported to the Company or within 90 days after suit is filed, the Deductible amount the Named Insured is obligated to pay will be reduced by fifty percent (50%), or by $12,500, whichever is less.
The failure of the Named Insured to expressly consent to a settlement or compromise recommended by the Company shall be deemed to be refusal to consent to a settlement or compromise.
While it is possible to reduce the deductible there is also a ‘Hammer Clause’ in the settlement paragraph. After reaching a settlement the insurer’s liability is caped. Even though the insured has the right to refuse the settlement. The insured’s refusal results in a risk that puts the insured potentially on the hook for any additional defense costs and or additional indemnity payments.
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Lee Norcross, MBA, CPCU
Managing Director, CEO
(616) 940-1101 Ext. 7080