Insured/Third-Party Settlements and Consent Judgments After Insurer Denies Coverage

When an insurer denies policy coverage for a third-party suit or issues a reservation of rights and files a declaratory judgment action, it faces the risk that the insured defendant will settle with the third-party plaintiff in exchange for a covenant not to seek recovery from the insured defendant, but instead seek recovery from the insurer. In the most extreme circumstances, Impermissible collusion between the insured defendant and the third-party plaintiff can result in the extinguishment of the insurer’s duty to indemnify. Given the frequency of litigation over such settlements, practitioners on both sides need to navigate the issue of collaborative settlements carefully.

Listen as our authoritative panel of insurance practitioners analyzes collaborative settlements and consent judgments between insured defendants and third-party plaintiffs intended to induce the insurer to indemnify after initially denying coverage. The panel will review factors the courts consider in deciding whether the settlement is reasonable and permissible or unreasonable collusion that extinguishes the insurer’s duty to indemnify.

1. Plaintiff’s burden to establish entitlement to collect on the judgment
2. Recent case law and factors courts consider in determining whether a collaborative settlement is reasonable and permissible
3. Strategies for insurers to address and defend against collaborative settlement agreements

The panel will review these and other key issues:

• What elements does a plaintiff have to establish to collect an excess verdict against an insurer?
• Which factors do courts consider in determining whether a collaborative settlement is reasonable and permissible?
• What are the best strategies for insurers to challenge collaborative settlement agreements?