Hammer Clause

Yes, you can touch this, M.C.

Santa’s brother and the leader of a German motorcycle gang. He flies around the world on his Harley every Saint Columbanus Day, delivering chains and leather jackets to good little men facing mid-life crisises.

In finance, a hammer clause represents a provision in an insurance policy that would force the insured party to take a settlement.

You run a push-cart sushi stand in downtown Phoenix. A few of your customers get sick from yellowtail that spoiled in the heat. They sue.

You want to fight the case in court, but your insurance company thinks it will be cheaper to settle. The policy has a hammer clause, which limits the indemnity. If you go to court, you’re paying the costs on your own.

The hammer clause is known by the nicer name of “settlement cap provision,” as well as the even nastier moniker “blackmail clause.”