Settlement Without Named Insured’s Consent Supports Breach of Contract Claim
The United States District Court for the Northern District of Illinois, applying Illinois law, has held that an insurer breached a professional liability policy by settling a claim on behalf of one insured without obtaining the consent of other insureds who were also named in the underlying lawsuit, despite a consent-to-settle provision. Kinsey & Kinsey, Inc. v. Philadelphia Indem. Ins. Co., 2026 WL 1470258 (N.D. Ill. May 26, 2026).
The insured consulting firm purchased a professional liability policy that provided up to $1 million in coverage. In the underlying action, the consulting firm, one of its principals, and an employee were all named as defendants in a lawsuit alleging fraudulent misrepresentation and breach of contract. During the trial, the plaintiff offered to settle with the individual employee for $1 million. The insurer accepted the offer over the objection of the company and its principal, and without obtaining their consent. The jury ultimately found the consulting firm liable for breach of contract with a total judgment of $786,749, which was later determined not to be covered. The consulting firm sought reimbursement from its insurer and argued that the insurer breached the policy by approving the settlement despite its explicit lack of consent.
The policy provided that the insurer had the “right and duty” to defend the multiple insureds and that the insurer “shall not settle any claim without your consent.” In the coverage action, the court found that the consent-to-settle clause was ambiguous as to whose consent was required and construed the provision in favor of the insured. In doing so, the court explained that the word “your” in the provision referred to multiple insureds under the policy, not just the insured on whose behalf the insurer negotiated the settlement. The court therefore found the insurer liable for breach of contract.
The insurer also argued that the consulting firm suffered no injury from the breach because it was determined that the judgment was unquestionably not covered. In response, the insured advanced bad faith and equitable estoppel arguments, contending that the insurer exhausted the policy in a manner that eliminated potential coverage and controlled the defense without reserving its rights. The court declined to grant summary judgment for the insurer on this issue, holding that a reasonable jury could find that the insurer’s breach caused harm to the insured, including by foreclosing the possibility that covered claims would contribute to the judgment.
