Settled insanity is defined as a permanent or "settled" condition caused by long-term substance abuse and differs from the temporary state of intoxication. In some United States jurisdictions, "settled insanity" can be used as a basis for an insanity defense, even though voluntary intoxication cannot, if the "settled insanity" negates one of the required elements of the crime such as malice aforethought. However, U.S. federal and state courts have differed in their interpretations of when the use of "settled insanity" is acceptable as an insanity defense and also over what is included in the concept of "settled insanity".

Early English common law recognized "settled insanity" as a complete defense for a person who is a habitual drunk but is not intoxicated at the time of the offense. A complete defense exonerates the accused and is a verdict of not guilty. Thus a person meeting the criteria of "settled insanity" is not considered responsible for his actions. Under the M'Naghten Rules, the first attempt in criminal law to address the issue of a mentally ill defendant, mental illness (or insanity) can be used as a defense if the defendant was unable to understand the criminal nature of his act or was unable to distinguish right from wrong at that time of the offense. The standard for an insanity defense developed by the American Law Institute requires a showing that the defendant's mental illness prevented him from abiding by the law. Traditionally, under English common law intoxication, no matter to what degree, was not considered grounds for excusing the defendant's criminal behavior. However, over the last half century, there has been a movement toward allowing intoxication as evidence admissible in court to help the jury understand the criminal act and perhaps use it as an excuse or a mitigating factor.

Although voluntary intoxication is not considered an excuse for a criminal act, if it can be shown that the defendant was too intoxicated to deliberate or premeditate the wrongful act, (lacking malice aforethought), a defense of diminished capacity, while not excusing the defendant from responsibility for the act, can serve to reduce the charges. Similarly, the plea of temporary insanity (applicable only to charges of murder) can serve to reduce the charges from first degree murder to assault or lessen the sentence if it can be shown that the defendant, due to intoxication, acted without deliberation or reflection (lacking malice aforethought), thus negating specific intent. However, ten states have rejected that specific intent can be negated by voluntary intoxication. Some jurisdictions allow voluntary intoxication in the context of a preexisting mental disorder to qualify for an insanity defense.

Over time, as United States court ruling have been refining the insanity defense, the concept of "settled insanity" has been evolving. Originally, any form of insanity caused by the voluntary use of drugs was not an eligible defense for a criminal offense. The rationale was that any act that results from voluntary behavior, including the voluntary intake of drugs, is choosing to increase the risk of breaking the law. Most United States jurisdictions now recognize that the long-term voluntary use of an intoxicating substance can cause a stable or "settled insanity" that can serve as a defense to a criminal act, especially if the long-term use exacerbated a preexisting mental condition. For example, the concept of "settled insanity" includes the delirium tremens experienced by alcoholic during alcohol withdrawal, but it excludes temporary insanity of intoxication.

California law recognizes "settled insanity" in the case of long-term use, but it does not recognize the temporary mental state caused by the recent consumption of an intoxicant as a sufficient defense. Moreover, recent rulings have upheld that the insanity need not be permanent to qualify as a defense of "settled insanity". For instance, in a case where a woman with a substance-induced psychosis murdered her mother, expert witnesses testified that the defendant had "personality defects" that predisposed her to psychosis, and that the psychosis was triggered by chronic substance abuse and the resulting nine months of hospitalization. The defendant was found guilty because the court ruled that her insanity was temporary; however, the Supreme Court of California overturned the lower court's guilty finding, ruling not guilty by reason of insanity, and stating that temporary psychosis not caused by an episode of intoxication constitutes settled insanity and qualifies as a complete defense.

In People v. Skinner (1985), the California Supreme Court further specified the criteria for "settled insanity". The person must have a mental illness that is relatively stable over time, not caused solely by the length of time the substance was abused, and it must also meet the legal definition of insanity in that jurisdiction. Therefore, it appears that the court is stating that a threshold condition for the insanity defense exists when there is a permanent impairment caused by chronic substance abuse in a person with a preexisting mental illness unrelated to substance abuse, but aggravated or set off by voluntary intoxication.

However, a 2007 decision by the Colorado Court of Appeals in People v. Grant upheld a lower court ruling that did not allow expert testimony on the defendant's state of mind due to voluntary intoxication, thus ruling out any possibility that the issue of "settled insanity" might be raised.

In Jervon Lamont Herbin v. Commonwealth of Virginia (1998), Herbin appealed his convictions of malicious wounding, two counts of forcible sodomy, abduction, and attempted rape. At the time of the offenses, Herbin was a long-term guest of the victim's parents and was on crutches due to a gunshot wound received when he tried to enter his mother's house while on crack cocaine a week before. After the victim's parents had left the home, Herbin asked the victim to help him put on his socks. Then he threatened her with a knife and ordered her to take off her clothes. He slashed each of her breasts and stabbed her in the abdomen. Then he committed the sex offenses. The defendant asked the victim about whether the cars had manual or automatic transmission. When the victim told him that the car had a manual transmission, the victim was able to convince Herbin to call paramedics. Herbin pretended to call for assistance and eventually did call paramedics. He first told authorities that she was injured in the kitchen, and then he told the authorities that he was trying to commit suicide and she was injured trying to save him.