Author: Tom Bazemore
Title: “Picking Up the Tab When You Weren’t Invited to Dinner: An Insured’s Effort to Collect a Consent Judgment to the Surprise of the Insurer”
FDCC Insights: A Journal for Defense and Corporate Counsel, June 2017
The obligation of an insurer to defend an insured is universally recognized as broader than an insurer’s obligation to indemnify. Even so, insurers are frequently confronted with a claim or lawsuit that does not warrant coverage and no defense is provided. The coverage issues underlying such a decision are innumerable. As an example, a property insurer may deny coverage to its insured based upon a finding that the underlying claim did not arise during the coverage period. Similarly, an insurer may deny coverage under a general liability policy after concluding that the underlying accident arose from a set of facts that falls within the parameters of one of the policy’s express exclusions. In either example, the decision to deny coverage and refuse to provide a defense removes the insurer from the “front row seat” in the litigation.
In the absence of a defense provided by the insurer, what remains is a strong motivation for the insured to strike a bargain that will eliminate the need to further defend the lawsuit and guarantee that the insured will never face any out-of-pocket expense. Oddly, the underlying claimant and the insured share a number of motivations in this situation: each seeks to end the litigation in the best possible financial position and to do so with certainty and finality. Frequently, the solution reached by the insured and the claimant is a consent judgment.
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