Stop Calling it a “Nuisance”

If you have been in this industry for a while, you’re familiar with the term “nuisance settlement,” but if you are unfamiliar, I’ll break it down:

A nuisance settlement is a compromise made by the defense to resolve a claim for an amount that is less than the cost of continued litigation, particularly on a claim where the allegations are unfounded.

Now, I’m a big believer in the idea that claims decisions should be financially sound decisions driven by logic, and not driven by emotion. The sunk cost fallacy is a real thing in the world of claims, and it is a dangerous trap to fall in.

But nuisance settlements still feel gross.

And we need to stop calling them “nuisance” settlements.

The term was coined many years ago, when the nuisance settlement amounts were less than $5,000. Today, these same settlement amounts are more than triple that.

These amounts don’t feel like nuisance amounts, and calling them that is a slap in the face to policyholders who are struggling to afford coverage for their business.

Can we all agree to call them something else? Maybe “Cost of Defense” settlements? Just throwing stuff at the wall to see what sticks, but I’m open to ideas. I’ll take any name except “nuisance”.

The word nuisance also makes it sound like we don’t want to do the work of defending the claim, and that is not true. I love fighting the good fight. But if the good fight costs you an additional $15,000 in subpoenaed records, depositions, investigations, attorney fees and multiple medical-legal evaluations, then you have to ask yourself if the cost of the fight is the best financial decision.

Settling is a logical decision, but that doesn’t make it sting any less to a policyholder who tried to do everything right. We can lessen the sting a bit by being mindful of our language, and stop referring to these settlements as a nuisance.