What does 'nuisance value' refer to when an insurance company settles a claim?

Nuisance value specifically refers to the amount an insurance company is willing to pay to settle a claim to avoid the costs and complications associated with litigation. When a claim is viewed as potentially disruptive or burdensome—be it due to its trivial nature, the low likelihood of a successful legal outcome, or simply the desire to resolve a matter quickly—insurers may opt to settle for what they deem a nuisance value. This allows them to close the case without incurring further expenses related to court proceedings, attorney fees, or prolonged negotiations.

Choosing to settle at nuisance value reflects a practical approach in risk assessment, where the insurance company weighs the expenses of litigation against an immediate, albeit modest, payout. This way, they can manage their resources effectively and mitigate any potential reputational harm from extended disputes. Thus, the concept encapsulates a strategic decision-making process within the realm of claims management.