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buyout settlement clause

A buyout settlement clause is a provision found in media liability insurance policies allowing an insured the option to refuse settlement of a claim for an amount offered by an insurer and agreed upon by a claimant.

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The clause allows the insurer to tender that amount to the insured, thereby "buying out" of the claim. At that point, the insured takes complete control of the case, bearing the risk that ultimate settlement and defense costs will exceed the buyout figure. If the case is resolved for less than that amount, the insured may keep the difference.