Policyholders' Hands Are Strengthened When Insurance Companies Refuse to Settle - Appellate decisions on a California case suggest the tables may be turning

Metropolitan Corporate Counsel

PUBLISHED ON: May 5, 2017

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A lawsuit of any magnitude can be devastating for your business, whether it manifests its hardship financially or otherwise. The stress of making the right decision for your company’s future can seem insurmountable at times. And just like that, a light at the end of the tunnel: a settlement offer that is reasonable and good for your business. The only problem is that your insurance company will not consent.

This places policyholders in an all-too-common, and difficult, situation: Settle an underlying case absent the insurance company’s consent, or fail to settle out of fear that the insurance company will not cover the claim, given the “consent-to-settle” provisions in a policy. The problem is often compounded by the need to obtain not just the primary insurance company’s consent, but also that of any excess insurance companies sharing the risk.

While insurance companies may have had the upper hand in the past, the tables may be turning in favor of policyholders. A recent decision in the U.S. Court of Appeals for the Ninth Circuit seemed to herald this change.

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