A divided court confronted a liability insurance policy provision banning unauthorized settlements in a case presenting bad faith claims alleged against the liability carrier. The differences between the majority and the dissent mirror the differences between the skiing patrons of Vail and the rugged residents of Colorado Springs.
A majority of the Colorado Supreme Court held that the carrier did not need to support its defense with proof that it was prejudiced by the policyholder's alleged violation of a clause in its liability policy which bars any insured from settling claims without the liability carrier's consent. The defendant carrier needed to show only that the clause was violated in order to prevail on that defense. A majority of the court declined to superimpose a "prejudice" requirement similar to the prejudice requirement in late notice cases, for example. The majority called the provision "the no-voluntary-payments clause of the policy in this case." Travelers Prop. Cas. Co. of Am. v. Stresscon Corp., 370 P.3d 140, ¶ 11, at 143 (Colo. 2016).
Please Read The Disclaimer. ©2016 by Dennis J. Wall, author of Litigation and Prevention of Insurer Bad Faith (3d ed. Thomson Reuters West in 2 Volumes, with Supplements). See in particular Volume 1, § 5:14, which addresses "Coverage or policy defenses" to third-party bad-faith-in-settlement claims. You are invited to visit the author's website here. All rights reserved.
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