Insurer not liable for claim settled without consent

Patrick Bracher from Norton Rose Fulbright.

An insured lead mining company settled a pollution suit for $55 million without inviting the insurer to participate in the deal. The insurer was therefore not liable to pay the claim.

According to the policy, the insured was required to consult the insurers in settling claims. Although the insured advised the insurer that mediation to settle the claim was to take place, there was no suggestion that settlement was about to occur nor was the time and place of the mediation meeting given to the insurers.

The US court rejected the argument that the insurers should, on receipt of the letter, have come forward and participated in the settlement negotiations. They could hardly be expected to attend uninvited at a mediation at an undisclosed location, time and place.

(The Doe Run Resources Corp v The Fidelity & Casulty Co. of New York, case number G050689, in the court of Appeal of the State of California, Fourth Appellate District)

First published by Financial Institutions Legal Snapshot.