What to know about buyout settlement clauses

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What to know about buyout settlement clauses

On Behalf of | Nov 16, 2021 | Product Liability |

If you purchased liability insurance from a Texas coverage provider, your policy may come with a buyout settlement clause. This clause allows you to reject any settlement offer that your provider may make on your behalf if you are named as a defendant in a civil case. Let’s take a closer look at what may happen if you choose to exercise this clause and why you may choose to do so.

What happens when you opt for a buyout settlement?

When you choose to exercise a buyout settlement option, your insurance provider writes a check for the amount that it had intended to provide to the plaintiff. You are now free to do whatever you want with this money. In exchange for making this payment, the insurance provider is no longer liable for any current or future damages to which the plaintiff may be entitled.

Why would you exercise this option?

In a personal injury case, you may opt to take such action because you believe that you can settle it for less on your own. In fact, you may believe that you can settle it without having to pay anything to the plaintiff because the allegations made by that person are without merit. Therefore, you may feel that it is better to have the case thrown out as opposed to settling and potentially doing damage to your personal or corporate brands.

If you are a defendant in a personal injury case, your insurance company may be liable for paying any damages awarded to the plaintiff. However, it’s worth noting that you don’t have to accept a settlement just because your insurance provider thinks it is a fair offer. Instead, you have the right to settle the case yourself or take it to trial.