50.82—Advance approval of settlements.
(a)
Mandatory submission of
settlements for advance approval. An insurer
shall submit to Treasury for advance approval any
proposed agreement to settle or compromise any
Federal cause of action for property damage,
personal injury, or death, asserted by a
third-party or parties against an insured,
involving an insured loss, all or part of the
payment of which the insurer intends to submit as
part of its claim for Federal payment under the
Program, when:
(1)
Any portion of the proposed settlement
amount that is attributable to an insured loss or
losses involving personal injury or death in the
aggregate is $2 million or more per third-party
claimant, regardless of the number of causes of
action or insured losses being settled; or
(2)
Any portion of the proposed settlement
amount that is attributable to an insured loss or
losses involving property damage (including loss
of use) in the aggregate is $10 million or more
per third-party claimant, regardless of the number
of causes of action or insured losses being
settled.
(b)
Discretionary review of other
settlements. Notwithstanding paragraph (a),
Treasury may require that an insurer submit for
review and advance approval any proposed agreement
to settle or compromise any Federal cause of
action for property damage, personal injury, or
death, asserted by a third-party or parties
against an insured, involving an insured loss, all
or part of the payment of which the insurer
intends to submit as part of its claim for Federal
payment under the Program where the settlement
amounts are below the applicable monetary
thresholds identified in paragraphs (a)(1) and (2)
of this section.
(c) Factors.
In determining
whether to approve a proposed settlement, Treasury
will consider the nature of the loss, the facts
and circumstances surrounding the loss, and other
factors such as whether:
(1)
The proposed settlement compensates for a
third-party's loss, the liability for which is an
insured loss under the terms and conditions of the
underlying commercial property and casualty insurance policy, as certified
by the insurer pursuant to § 50.83(d)(2) ;
(2)
Any amount of the proposed settlement is
attributable to punitive or exemplary damages
intended to punish or deter (whether or not
specifically so described as such damages);
(3)
The settlement amount offsets amounts
received from the United States pursuant to any
other Federal program;
(4)
The settlement amount does not include any
items such as fees and expenses of attorneys,
experts, and other professionals that have caused
the insured losses under the underlying commercial
property and casualty insurance policy to be
overstated; and
(5)
Any other criteria that Treasury may
consider appropriate, depending on the facts and
circumstances surrounding the settlement,
including the information contained in §
50.83.
(d)
Settlement without seeking
advance approval or despite disapproval. If an
insurer settles a cause of action or agrees to the
settlement of a cause of action without submitting
the proposed settlement for Treasury's advance
approval in accordance with paragraph (a) or (b)
of this section, and in accordance with § 50.83 or
despite Treasury's disapproval of the proposed
settlement, the insurer will not be entitled to
include the paid settlement amount (or portion of
the settlement amount, to the extent partially
disapproved) in its aggregate insured losses for
purposes of calculating the Federal share of
compensation of its insured losses, unless the
insurer can demonstrate, to the satisfaction of
Treasury, extenuating circumstances.