Consent to settle/incur defense costs

In answering a certified question from the Ninth Circuit, the Arizona Supreme Court has held that, where the policy contains no duty to defend, the objective reasonableness of an insurer’s decision to withhold consent to settlement is judged from the perspective of the insurer.  Apollo Education Group, Inc. v. National Union Fire Ins. Co. of Pittsburgh, PA, 2021 WL 710224 (Ariz. Feb. 17, 2021).

Continue Reading Where Policy Contains no Duty to Defend, Reasonableness of Insurer’s Decision to Withhold Consent to Settlement Judged from Insurer’s Perspective

The United States District Court for the Southern District of Alabama, applying Alabama law, has held that an insurer could not invoke a policy’s consent-to-settle requirement to avoid liability because the insurer refused to participate in settlement negotiations despite having notice of the negotiations, and thus had waived its right to challenge the settlement for lack of consent.  Granite State Ins. Co. v. New Way Out, Corp., 2021 WL 191637 (S.D. Ala. Jan. 19, 2021).

Continue Reading Insurer’s Refusal to Participate in Settlement Negotiations Waives Consent-to-Settle Requirement

The Massachusetts Supreme Judicial Court has held that consent-to-settle clauses in professional liability policies that give the insured absolute discretion regarding settlement do not inherently conflict with the state’s unfair insurance settlement practices statute, Mass. G.L. ch. 176D § 3(9)(f).  Rawan v. Continental Casualty Company, 136 N.E.3d 327 (Mass. Dec. 16, 2019).  The case had attracted considerable attention from amici concerned about potential disruption of the professional liability insurance market in Massachusetts if such consent-to-settle clauses were deemed impermissible.

Continue Reading Massachusetts SJC: E&O Insurers May Allow Insureds to Veto Settlement, But Settlement-Related Duties to Claimants Remain

Applying Delaware law, a federal court in New York has held that where an insured waited more than a year to report a lawsuit to its insurer and during that period incurred more $3.5 million in legal fees, the insurer had no obligation to pay pre-tender defense costs, without regard to whether the insurer could show prejudice from the delay in notice.  Abrams v. RSUI Indem. Co., 2017 WL 3433108 (S.D.N.Y. Aug. 10, 2017).

Continue Reading No Coverage for $3.5 Million in Pre-Notice Defense Expenses Where Notice Was a Year Late

Applying New York law, a New York intermediate appellate court has held that insurers’ unreasonable delay in addressing an insured’s claim and their repeated insistence that several policy provisions barred coverage for the claim alleviated the insured’s obligation to seek the insurers’ consent to settle.  J.P. Morgan Securities Inc. v. Vigilant Ins. Co., 2017 WL 2744405 (N.Y. App. Div. June 27, 2017).

Continue Reading Insurer’s Consent to Settle Not Required Following Effective Denial of Coverage

The Supreme Court of Appeals of West Virginia has held that a consent judgment did not bind a general liability insurer because the insurer was not a party to the lawsuit and did not expressly agree to the judgment.  Penn-America Ins. Co. v. Osborne, 2017 WL 878716 (W. Va. March 1, 2017).

Continue Reading Court Finds Insurer Not Bound by $1 Million Consent Judgment

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 breached the terms of the policy by allowing a default judgment to be entered against it.  XL Specialty Ins. Co., v. Lakian, 2017 WL 1063451 (S.D.N.Y. March 20, 2017).  The court further held that the insurer had not waived its policy defenses by writing a letter to the broker informing it of the insured’s duty to defend the action or by filing an interpleader action without naming the judgment creditors.  The court also concluded that a third judgment creditor for an insured person had no rights to the policy because it had no claim under the policy at the time the interpleader action was filed, and because the policy was not property of the insured person.  Wiley Rein represents the insurer.

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

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 Bank, FSB v. Houston Cas. Col., 2017 WL 218900 (9th Cir. Jan. 9, 2017).

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

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, Inc. v. Travelers Property Cas. Co. of Am., 2017 WL 74694 (11th Cir. Jan. 9, 2017).

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

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