Executive Summary Blog

Executive Summary Blog

Legal developments affecting professional liability insurers

Category Archives: Consent to settle/incur defense costs

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Judgment Creditor Not Entitled to Policy Proceeds Where Insured Defaulted Without Insurer’s Consent

Posted in Consent to settle/incur defense costs
The United States District Court for the Southern District of New York, applying New York law, has held that two judgment creditors of an insured were not entitled to insurance policy proceeds where the insured had violated the terms of the policy by allowing a default judgment to be entered against it.  XL Specialty Ins.… Continue Reading

Insured’s Failure to Obtain Insurer’s Consent Prior to Executing Settlement Term Sheet Precludes Coverage

Posted in Consent to settle/incur defense costs
The United States Court of Appeals for the Ninth Circuit, applying California law, has held that an insured breached the consent-to-settle provision of its professional liability insurance policy by executing a settlement term sheet prior to seeking or obtaining the consent of its insurer and therefore was not entitled to coverage under the policy.  Onewest… Continue Reading

Florida Statute Does Not Estop Insurer from Denying Reimbursement of Pre-Tender Defense Costs

Posted in Consent to settle/incur defense costs, Defense Costs
The United States Court of Appeals for the Eleventh Circuit, applying Florida law, has held that a thirty-day statutory deadline to deny coverage did not apply to an insurer’s refusal to reimburse the insured for its pre-tender defense costs because this refusal did not constitute a “coverage defense” within the meaning of the statute. Embroidme.com,… Continue Reading

Excess Insurer’s Unambiguous Consent-to-Settlement Provision Bars Coverage

Posted in Consent to settle/incur defense costs, Excess insurance/exhaustion
The United States Court of Appeals for the Sixth Circuit, applying Michigan law, has held that a policy provision requiring an excess insurer’s written consent before entering into a settlement was not ambiguous and therefore barred coverage under the excess policy.  Stryker v. National Union Fire Ins., 2016 WL 6818853 (6th Cir. Nov. 18, 2016).… Continue Reading

Insured’s Settlement Without Regard to Reasonableness Rendered Consent Judgment Unenforceable Against Insurer that Breached Duty to Defend

Posted in Bad faith/duty to settle, Consent to settle/incur defense costs
The United States Court of Appeals for the Eleventh Circuit, applying Florida law, has held that an insurer’s breach of the duty to defend did not render it liable for a consent judgment where the insured did not consider the reasonableness of the settlement amount.  Sidman v. Travelers Cas. & Sur., 2016 WL 6803034 (11th… Continue Reading

Insurer that Rejected Exception from Release Language Liable for Bad Faith Failure to Settle Despite Offering Policy Limits

Posted in Bad Faith, Bad faith/duty to settle, Consent to settle/incur defense costs
A California intermediate appellate court has held that an insurer is liable for bad faith failure to settle, even though it had made a timely offer to settle for its full policy limits, where the insurer declined to agree to release terms proposed by the claimants to which the insured refused to agree. Barickman v.… Continue Reading

Montana High Court Rules that Evaluation of Reasonableness of Stipulated Settlement Must Consider the Merits and Value of the Underlying Case

Posted in Bad faith/duty to settle, Consent to settle/incur defense costs
The Montana Supreme Court has held that, even where an insurer breaches its duty to defend and is estopped from denying coverage for a later settlement, the insurer is still entitled to challenge the reasonableness of the settlement, and the court must assess the merits and value of the underlying case in assessing the settlement… Continue Reading

Due to Lack of Notice, E&O Carrier Has No Duty to Indemnify Insured Auto Insurer’s Settlement Payment Stemming from Bad Faith Claim

Posted in “Claim”, Consent to settle/incur defense costs, Notice of Claim
An Illinois federal court, applying Illinois law, has ruled that, due to lack of proper notice, an E&O insurer had no duty to indemnify its insured auto insurance company’s $7 million settlement payment stemming from a bad faith claim in an underlying auto accident lawsuit. Lexington Ins. Co. v. Horace Mann Ins. Co., 2016 WL… Continue Reading

Colorado Supreme Court: No Prejudice Required to Deny Coverage for Settlement Without Consent

Posted in Consent to settle/incur defense costs, Cooperation
The Colorado Supreme Court has held that an insurer had no duty to cover a settlement entered into by an insured regardless whether the insured’s failure to obtain the insurer’s consent prejudiced it in any way. Travelers Prop. Cas. Co. v. Stresscon Co., 2016 WL 1639565 (Colo. Apr. 25, 2016). Wiley Rein represented an amicus… Continue Reading

Dentist’s Alleged Sexual Misconduct Not Covered Under EPL Policy

Posted in Consent to settle/incur defense costs, Notice of Claim, Public Policy prohibition on insurance, Wrongful Act
In a victory for Wiley Rein’s client, a Florida federal court has held that an employment practices liability policy that provided coverage for “harassment” did not cover a licensing action arising out of a dentist’s alleged sexual misconduct. Turbyfill v. Scottsdale Indem. Co., No. 3:14-cv-283 (N.D. Fla. Feb. 24, 2016). The court also noted that… Continue Reading

Pre-Tender Defense Costs are Uncovered Voluntary Payments

Posted in Bad faith/duty to settle, Consent to settle/incur defense costs, Defense Costs
A federal district court, applying California law, has held that a “no voluntary payment” provision precluded coverage for defense expenses voluntarily incurred by an insured pursuant to its agreement to indemnify its directors and officers prior to providing notice to the insurer of its indemnity obligation. Corthera, Inc. v. Scottsdale Ins. Co., 2016 WL 270951… Continue Reading

Reimbursement of Defense Costs at Panel Rate Does Not Constitute Irreparable Harm for Preliminary Injunctive Relief

Posted in Bad faith/duty to settle, Consent to settle/incur defense costs, Defense Costs
The United States District Court for the Southern District of New York has held that an insurer’s reimbursement of only a portion of the full amount of defense costs sought by an insured under a duty to advance policy does not constitute irreparable harm for purposes of preliminary injunctive relief. Stuckey v. Nat’l Union Fire… Continue Reading

Tenth Circuit Holds that Implied Duty to Investigate and Initiate Settlement Negotiations Does Not Extend to Excess Insurer

Posted in Bad faith/duty to settle, Consent to settle/incur defense costs, Excess insurance/exhaustion
The United States Court of Appeals for the Tenth Circuit has held that while a primary insurer may owe its insured a duty to initiate settlement discussions under Oklahoma law, that duty does not extend to an excess insurer prior to exhaustion of the underlying coverage. SRM, Inc. v. Great Am. Ins. Co., No. 5:11-CV-01090-F… Continue Reading

Pennsylvania Supreme Court Adopts “Reasonableness” Standard for Enforcing Cooperation Provision When Insurer Breaches its “Duty to Settle”

Posted in Bad faith/duty to settle, Consent to settle/incur defense costs, Cooperation, Loss
The Pennsylvania Supreme Court has held that a group of insureds could recover from their insurers for a settlement that was “fair, reasonable and non-collusive” regardless of whether the insureds obtained the insurers’ consent as required by the policies and regardless of whether the insureds failed to show that the insurers acted in bad faith.… Continue Reading

Demand Within Limits Not Required for California Bad Faith Failure-to-Settle Liability

Posted in Bad faith/duty to settle, Consent to settle/incur defense costs
A federal court in California has denied an insurer’s motion to dismiss an insured’s bad faith failure-to-settle claim, holding that a demand within limits or other settlement opportunity within limits is not a prerequisite to bad faith liability.  Aspen Spec. Ins. Co. v. Willis Allen Real Estate, 2015 WL 3765008 (S.D. Cal. June 15, 2015).… Continue Reading

Eleventh Circuit Affirms Dismissal of Insured’s Complaint in “Consent to Settle” Case

Posted in Bad faith/duty to settle, Consent to settle/incur defense costs, Cooperation, Loss
The United States Court of Appeals for the Eleventh Circuit ruled in favor of Wiley Rein’s client, an insurer, when it affirmed the dismissal of a complaint filed by an insured seeking coverage for amounts paid to settle an underlying lawsuit and alleging bad faith on the grounds that the insured settled the underlying lawsuit… Continue Reading

Insurer’s Recoupment Claim Still Alive After Appellate Court Rejects Dismissal Based on Waiver

Posted in Allocation, Consent to settle/incur defense costs, Notice of Claim
The United States Court of Appeals for the Eleventh Circuit, applying Georgia law, has reversed the dismissal of an insurer’s complaint for recoupment of amounts it paid to settle a claim against its insured, holding that the district court erred in relying on factual conclusions that did not flow inevitably from the insurer’s complaint in… Continue Reading

Georgia Supreme Court Unanimously Holds That Insured Cannot Sue Insurer for Amounts Paid to Settle Claim Without Insurer’s Consent

Posted in Bad faith/duty to settle, Consent to settle/incur defense costs, Cooperation, Loss
The Supreme Court of Georgia has held unanimously that an insured’s complaint against its insurer seeking coverage for amounts paid to settle an underlying lawsuit and alleging bad faith was properly dismissed because the insured settled the underlying lawsuit without its insurer’s consent. Piedmont Office Realty Trust, Inc. v. XL Spec. Ins. Co., No. S15Q0418… Continue Reading

Claimant Has No Right to Policy Proceeds as Judgment Creditor of Insured Who Defaulted in Underlying Action

Posted in Consent to settle/incur defense costs, Cooperation
Applying New York law, the United States District Court for the Southern District of New York has held that a judgment creditor of an insured that defaulted in an underlying action had no right to policy proceeds because the insured breached the policy by allowing a default judgment to be entered against it.  XL Specialty… Continue Reading

Ninth Circuit Finds Breach of Fiduciary Duty Claim Seeks Damages, Not Restitution

Posted in Consent to settle/incur defense costs, Loss, Related Claims and associated exclusions
The United States Court of Appeals for the Ninth Circuit, applying California law in a decision marked not for publication, has held that, while claims for restitution are uninsurable under California law, the underlying action asserted claims for breach of fiduciary duty seeking potentially covered “damages.”  Dobson v. Twin City Fire Ins. Co., 2015 WL 191526… Continue Reading

Trial Court Erred In Not Determining Whether Insured Had Sufficient Information to Reasonably Expect that a Claim Would Be Made Against it Prior to Applying for Policy

Posted in “Claim”, Consent to settle/incur defense costs, Notice of Claim, Prior Knowledge/Warranty Exclusion
A New Jersey appellate court has held that more fact finding is required to determine whether an insured college had sufficient information, prior to the policy period, for it reasonably to expect that a claim would be made against it where it had received a grievance letter and Equal Employment Opportunity Commission (EEOC) charge from… Continue Reading

Insureds’ Settlement with Bank of its Loan Defaults Not Covered

Posted in Consent to settle/incur defense costs, Loss, Notice of Claim
Applying Virginia law, the United States District Court for the Eastern District of Virginia has held that an insured’s settlement of a bank’s claim based on the insured’s loan defaults is not covered under the insured’s professional liability policy because the claim was not first made during the policy period and the insured’s notice was… Continue Reading

Policyholder Entitled to Hire Multiple Law Firms to Handle Underlying Suit as Long as Reasonable and Necessary for the Defense

Posted in Consent to settle/incur defense costs, Defense Costs
The United States District Court for the Central District of California, applying California law, has held that a licensee policyholder involved in an underlying trademark dispute was not precluded from seeking defense costs reimbursement for payments to two law firms acting as Cumis counsel.  Signal Products, Inc. v. American Zurich Insurance Company, 2:13-cv-04581-CAS-AJWx (C.D. Cal.… Continue Reading