Articles Posted in Consent-to-settle clauses

A recent decision by the Supreme Court of Georgia is an important reminder to businesses and individuals whose policy contains a “consent-to-settle” clause – make sure you have the insurer’s approval before proceeding with a settlement; otherwise the insurer can deny coverage and refuse to pay the settlement amount on your behalf.

The case is Piedmont Office Realty Trust, Inc. v. XL Specialty Insurance Company, 2015 WL 1773620 (2015), in which Piedmont Office Realty Trust filed suit against its insurer alleging breach of an excess insurance policy and bad faith for refusing to pay the full amount of a settlement Piedmont had agreed to in a separate matter. Piedmont had an excess policy that provided an additional $10 million in coverage beyond its primary policy’s limits.

The excess policy was issued to Piedmont by XL Specialty Insurance Company, and included a “consent to settle” provision that required Piedmont to obtain XL’s consent for the settlement of any securities claim that Piedmont became “legally obligated” to pay. According to the clause, XL’s consent could “not be unreasonably withheld.” The policy also contained a “no action” provision, which precluded Piedmont from suing XL unless it was in “full compliance with all of the terms” of the policy.

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