A liability insurer has a special defense against a consent judgment by its insured and a claimant. In most such cases filed in U.S. jurisdictions, the liability carrier can collaterally attack the consent judgment or other allegedly conclusive underlying settlement by putting on proof that the underlying judgment or settlement was itself the product of fraud, collusion, or "bad faith."
Such was the defendant liability carrier's defense against a bad-faith lawsuit filed under Nebraska law in Metropolitan Prop. & Cas. Ins. Co. v. Westport Ins. Corp., 131 F. Supp. 3d 923 (D. Nebr. 2015).
Nebraska law follows the clear majority if not unanimous rule that the burden of proof is on the liability carrier to prove its defense in such a case, and notwithstanding, that the insured "may be required to make a prima facie showing that the settlement was entered into in good faith and that the amount of the settlement amount [sic] is reasonable." Metropolitan Prop. & Cas. Ins. Co. v. Westport Ins. Corp., 131 F. Supp. 3d 923, 929-30 (D. Nebr. 2015). On the facts recited in incredible detail throughout the Court's opinion in that case, the Court agreed with the plaintiff that a sufficient prima facie showing had been made. The Court accordingly denied the liability carrier's motion for summary judgment on its defense of collusion in that case.
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