No Voluntary Payments Clause Bars Coverage for Unapproved Discovery Expenses

The United States District Court for the Central District of California, applying California law, held that a no voluntary payments clause in an employment practices liability policy barred coverage for post-tender discovery costs incurred without the insurer’s prior written consent. The California Endowment v. Radnor Specialty Ins. Co., 2026 WL 1243672 (C.D. Cal. May 6, 2026). The Court rejected arguments that the insurer had waived or was estopped from relying on the provision based on its earlier payment of expenses incurred without its consent as a “special accommodation.”

The coverage dispute arose from an employment practices lawsuit filed against a nonprofit organization. The insurer accepted the defense subject to a reservation of rights and retained defense counsel to represent the insured. While the defense was ongoing, the insured entered into an agreement with an electronic discovery vendor for document production services without obtaining the insurer’s consent. The insurer paid an initial invoice as a “special accommodation” but later denied coverage for a substantially larger invoice from the vendor for another phase of the project based on the policy’s no voluntary payments language.

The provision stated that “[n]o Insured shall settle any Claim, incur any Defense Costs, or otherwise assume any contractual obligation or admit any liability with respect to any Claim without the Insurer’s written consent, which shall not be unreasonably withheld.” The policy further defined “Defense Costs” to exclude “any fees, costs or expenses incurred by any Insured without the Insurer’s prior written consent.”

The court enforced the no voluntary payments provision, explaining that the clause protects an insurer’s contractual right to control the defense after it accepts a tender. Because the insurer had accepted the claim and appointed counsel, the insured had “no right to interfere” with that control by unilaterally hiring an e-discovery vendor and incurring substantial costs without the insurer’s knowledge and consent. The court also rejected the insured’s argument that the provision should not apply to defense expenses incurred after tender of the defense had been accepted.

Finally, the court rejected the insured’s waiver and estoppel arguments. It held that payment of the first invoice as a one-time accommodation did not amount to an intentional relinquishment of rights as to later invoices because it was paid as a “special accommodation,” and there was no estoppel because the insured identified no insurer conduct that induced it to retain the vendor or incur the disputed expenses. Finding no breach of contract, the court therefore granted summary judgment to the insurer.