NU Online News Service, Oct. 7, 4:00 p.m. EDT
Lloyd's Underwriters do not have to pay Safeco Insurance Company more than $1 million in defense costs in connection with a professional liability policy, because plaintiff Safeco did not have the defendant Lloyd's Underwriters' permission to settle the underlying claim.
In the case, Judge Charles F. Palmer of the Superior Court of California, County of Los Angeles, granted summary judgment to the Lloyd's Underwriters on Sept. 30 because a no-voluntary-payment clause, contained in the directors and officers policy in question, required Safeco to obtain written consent from Lloyd's Underwriters before entering into a settlement in an underlying case.
The underlying case–according to Robert Firriolo, a partner in the New York office of Duane Morris LLP who represented the defendants–involved a personal injury action brought against Safeco. In connection with that case, a bad faith lawsuit was brought against Safeco.
Safeco intended to settle the action, but, Mr. Firriolo said, the company did not notify Lloyd's Underwriters about the action until just before mediation. Furthermore, they provided very little detail. Lloyd's Underwriters replied that Safeco had to obtain written consent before settling the claim, Mr. Firriolo asserted, but never provided a written agreement to settle.
Instead, Safeco settled, and then sought defense costs from Lloyd's Underwriters.
Judge Palmer wrote, "The court finds defendants have shown by admissible evidence that the no-voluntary-payment clause…is applicable …and that defendants are excused from providing coverage based upon plaintiff's failure to obtain defendants' written consent before entering the agreement."
New Hampshire Insurance Company, which also provided coverage to Safeco, was also granted summary judgment since it was never asked to settle the underlying case.
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