INSURER
MAY SETTLE LIABILITY ACTION
AND SEEK REIMBURSEMENT
FOR NON-COVERED CLAIMS WITHOUT INSURED’S CONSENT
TO SETTLE
BLUE RIDGE V. JACOBSEN
In
Blue Ridge v. Jacobsen (2001) 01 CDOS 3736, an insured tendered her
defense in a personal injury action to her insurer.
The insurer agreed to defend under a reservation of rights.
The plaintiff in the personal injury action made a policy limits
demand against the insured. The
insurer determined that the demand was reasonable and informed the insured
that it wanted to settle and then seek reimbursement from her under its
reservation of rights if it had no duty to indemnify her under its
liability policy. The insurer also gave the insured the option of rejecting the
demand and assuming her own defense.
The insured refused to assume her own defense and demanded that the
insurer settle and waive its right to seek reimbursement from her.
The insured argued that the insurer’s failure to settle would
result in a waiver of her policy limits.
The
California Supreme Court held that the insurer could settle the personal
injury action and seek reimbursement from the insured in a subsequent
action if there was no coverage for the claims made against the insured,
even where the insured had refused to consent to the settlement.
The
Court held that if an insured could refuse to assume its own defense and
insist that the insurer settle or risk a bad faith action, and also refuse
to agree that the insurer could seek reimbursement should the claim not be
covered, insureds could force insurers to provide indemnification for
non-covered claims.
The
Court held that the insurer could settle the action and seek reimbursement
for non-covered claims without consent of the insured as long as it had:
-
made
a timely and express reservation of rights,
-
expressly
notified the insured of its intent to accept the demand, and
-
expressly
offered to allow the insured to assume its own defense if the insured
refused to consent to the settlement.
