Alabama Insurance Adjuster Practice Exam

What does the "Consent to Settle" clause in Dr. Adams's Professional Liability policy state?

1. The insurer can settle a claim at their discretion.

2. The insured has no say in settlement decisions.

3. The insurer requires approval from the insured before settling.

4. The settlement process can proceed without any input from the insured.

The correct answer is: The insurer requires approval from the insured before settling.

The "Consent to Settle" clause in Dr. Adams's Professional Liability policy establishes that the insurer must obtain approval from the insured before finalizing any settlement. This clause is essential for protecting the interests of the insured, as it allows them to have a say in how a claim is resolved, particularly in professional liability cases where reputational issues may be at stake. By requiring the insurer to seek the insured's consent, the clause ensures that the insured can review the terms of the settlement and decide whether it aligns with their interests and the implications it may have on their professional standing. This framework is particularly significant in fields where reputational damage from settlements could have long-lasting effects on a professional's career and practice.