Pedroli and Gauthier, LLC

A “Hammer Letter” is a type of demand letter that is sent from the injured parties attorney to the insurer of a tortfeasor (at fault party), or from the tortfeasor or their attorney to the insurance company.

In the former situation, the letter usually makes a demand for settlement for an amount within the tortfeasor’s limits of liability coverage.  The demand is open or available only for a limited and reasonable time in the circumstances.  The demand is made at a point when the insurer has had a reasonable opportunity to evaluate that the claim is valued or worth in excess of the policy limits.  The letter explains that if settlement is not made within the time allowed the demand will be withdrawn and judgment will be sought in excess of the available policy limits for the tortfeasor.

If a judgement is obtained for more than the coverage, the insurer’s policy holder will have to pay out of his pocket.  The aggrieved insured will have a claim against their insurer for breaching its fiduciary duty to its insured to act reasonable when it knew or should have known that there was a reasonable likelihood of the insured getting stuck with a judgment for more than his coverage.  Sometimes the plaintiff’s attorney and the tortfeasor’s personal attorney will work for the mutual goal for their mutual interests of getting the case settled within the policy limits.

The latter situation relates to the same time of demand from the tortfeasor or their attorney to the insurance company.  The letter makes a demand to offer up to the policy limits in order to settle the claim made against he tortfeasor so as to protect the personal assets.  These letters are effective as a type of insurance against having the insurance company playing hard ball with a case and exposing their insured to risk.  There are further actions that need to be taken by the attorneys before and after the hammer letter to ensure the effectiveness of the letter. There are also certain types of settlements that can be reached pursuant to Missouri Statute, section 537.065 to follow through on this settlement process.

Settlement negotiations and collections against insurance companies is a very complicated process with many pitfalls.  Experienced attorneys are necessary to assist in a successful outcome.  Call us for a free consultation.