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Consent to Settle Clause Upheld

Posted on Sep 17, 2015 in Announcements

On April 20, 2015, the Georgia Supreme Court held that an insured’s negligent failure to settle a claim against an insurance company was barred when the insured settled the underlying claim against it without the insurance company’s authorization. Piedmont Office Realty Trust v. XL Specialty Insurance Company, 771 S.E. 2d 864 (2015). There, the applicable insurance policy contained a “consent-to-settle” clause and a provision that there could be no action against the insurance company without full compliance with the provisions of the policy. The insurance company provided a defense to the insured in the underlying case. The insured consented to a settlement without the insurance company’s authorization and then attempted to recover the settlement amount from the insurance company. The Georgia Supreme Court held that the insured could not sue for bad faith refusal to settle. The Georgia Supreme Court recognized, however, that if the insurance company denied coverage outright and refused to provide any defense, the insured could enter into a settlement agreement without the insurance company’s authorization and then proceed with a potential bad faith action against the insurance company.

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