Settlement and Alternative Dispute Resolution
Settlement Fundamentals
Settlement authority defines what a negotiator may agree to without further approval. In insurance defense it is granted by the carrier, sometimes in stages, and it may be conditioned on specific terms such as a full release or confidentiality.
Authority is distinct from evaluation: counsel's recommended value and the authority granted often differ, and that gap is itself significant.
Alternative Names:
Authority, Negotiating Authority
Why it Matters?
Authority documentation matters in two directions. It keeps counsel from committing beyond what the carrier approved, and it creates the record showing what counsel recommended and when. In bad faith litigation, a defense evaluation recommending settlement at a number the carrier declined to authorize is powerful evidence, which is why recommendations should be written and specific rather than conveyed by phone.
Frequently Confused with
Related terms
Frequently asked questions
Who decides whether to settle, the insured or the insurer?
Why should authority requests be in writing?
