# Compare Settlement Terms Against Policy Limits > Guides the analyst through a coverage gap analysis memorandum comparing settlement terms against available insurance coverage, including policy-priority issues, reservation-of-rights handling, punitive-damages insurability, and defense-cost erosion. - Skill: `finchipaiorg/compare-settlement-terms-against-policy-limits` (Agent Skill) - Install (CLI): `npx skillmds@latest add finchipaiorg/compare-settlement-terms-against-policy-limits` - Raw SKILL.md: https://api.skillmd.com/api/skills/finchipaiorg/compare-settlement-terms-against-policy-limits/raw - Safety review: pending - Works with: Claude Code, Claude.ai, OpenAI Codex - Category: Coding & Dev Tools - Author: FinchipAIOrg (https://skillmd.com/u/finchipaiorg) - Updated: 2026-09-22 - Page: https://skillmd.com/skills/finchipaiorg/compare-settlement-terms-against-policy-limits --- # Skill: Compare Settlement Terms Against Policy Limits — Coverage Gap Analysis ## 1. Subject-matter triage - Determine whether the source set contains one policy or multiple policies, and whether the settlement allocates among covered and potentially uncovered components. - Identify the jurisdiction governing insurability issues and any choice-of-law language that could alter the coverage result. - Separate indemnity exposure from defense spend, because the coverage gap may turn on erosion, not just nominal limits. - Flag any reservation-of-rights correspondence that may change the analysis only if a triggering adjudication or other condition occurs. ## 2. Failure modes the skill is correcting - Treating the settlement as a single number without mapping each component to the correct layer, retention, sublimit, or excess position. - Assuming coverage exists or fails in the abstract without tying the conclusion to the actual policy form, endorsement language, and governing law. - Declaring punitive damages insurable or uninsurable without first identifying the controlling jurisdiction and the rule that jurisdiction applies. - Treating a reservation-of-rights letter as an immediate denial when the cited exclusion may depend on a later finding or defined event. - Ignoring that defense payments may reduce remaining indemnity capacity when the policy is defense-within-limits. - Failing to show how a coverage issue changes the client’s bargaining position, settlement structure, or residual exposure. - Providing descriptive coverage commentary without quantifying the gap against the policy structure in the record. ## 3. Legal frameworks / domain conventions that apply - Policy construction controls: analyze the insuring agreement, exclusions, conditions, endorsements, retentions, sublimits, and priority language together, not in isolation. - Layering and exhaustion: identify primary, excess, and umbrella positions; determine when each layer attaches and what must be exhausted before the next responds. - Employment-liability coverage forms: review whether the policy responds to discrimination, harassment, retaliation, wrongful termination, or related claims as pleaded and settled. - Individual insureds: determine whether officers, managers, or other persons are included, and whether any severability or conduct exclusions affect them differently from the entity. - Punitive-damages insurability: state the governing jurisdiction’s rule and apply the relevant public-policy doctrine or statutory restriction before discussing whether that component is recoverable. - Reservation of rights: treat the insurer’s position as provisional when the cited exclusion requires a final adjudication, judgment, or other specified trigger. - Defense-cost erosion: if the policy is defense-within-limits, treat defense payments as reducing the amount remaining for settlement indemnity. - Coverage-gap framing: the relevant question is not only whether some coverage exists, but whether the available coverage fully funds the settlement after priority, erosion, exclusions, and any uninsured components. ## 4. Analytical scaffolds - Coverage map: - For each policy, identify insurer, policy type, applicable limit, retention or deductible, defense-cost treatment, exclusions, endorsements, and priority position. - State whether the policy appears primary, excess, or umbrella on the face of the form and how that affects attachment. - Settlement-component allocation: - Break the settlement into its component pieces as reflected in the documents. - Match each component to the coverage potentially available under each policy. - Identify any component that is plausibly outside coverage. - Waterfall analysis: - Start with the first responding layer and work upward in order. - Show the amount absorbed at each layer, then the residual exposure after that layer. - Continue until the settlement is funded or a gap remains. - Punitive-damages analysis: - Identify the controlling jurisdiction. - State the governing rule on insurability. - Apply that rule to the punitive portion of the settlement and note any uncertainty created by mixed allegations or mixed allocations. - Reservation-of-rights analysis: - For each reservation letter, identify the exclusion or condition cited. - State whether the cited language is presently operative or contingent on a later finding. - Explain how the reservation affects settlement leverage, tender strategy, or the likelihood of a coverage dispute. - Defense-cost erosion analysis: - Determine whether defense costs reduce limits. - Account for defense spend already incurred. - State the remaining indemnity capacity after erosion, if any. - Issue-by-issue treatment: - For each coverage issue, state the scale of the problem using the source record, cross-reference the policy or correspondence that controls it, and explain the downstream consequence for the client. - If multiple policies, periods, claimants, or insureds are implicated, analyze each separately rather than as a blended average. ## 5. Vertical / structural / temporal relationships - Track the relationship among complaint allegations, settlement terms, policy wording, and insurer correspondence in chronological order. - Note whether the settlement resolves conduct before or after any policy period boundary, notice event, or reservation-of-rights trigger. - If different insureds or claimants are treated differently across the documents, preserve that distinction in the analysis. - If coverage depends on later findings, separate current exposure from contingent exposure so the memo does not overstate present denial rights. ## 6. Output structure conventions - Format the work as a coverage gap analysis memorandum. - Begin with a short executive summary that states the likely coverage picture and the main gap drivers. - Include a policy summary table capturing the principal terms relevant to coverage, layering, erosion, and exclusions. - Include a settlement-to-coverage mapping or waterfall that shows how the settlement is expected to be absorbed and where any shortfall remains. - Include separate sections for punitive-damages insurability, reservation-of-rights issues, and defense-cost erosion. - Use an ordinal severity label for each major issue and define the scale once at the outset. - Cover each issue with a concise but complete entry that identifies the governing rule or authority, the relevant document cross-reference, the magnitude of the issue, and the client consequence. - Conclude with a recommended-actions section that lists concrete next steps, the responsible role, and a timing anchor tied to the settlement or insurer-response posture.