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Insurance Law

Insurer Did Not Breach any Duty by Settling Claims without Insured’s Consent and Prior to Appointing Counsel

In American Western Door, the Central District of California granted a CGL carrier’s motion to dismiss an insured’s complaint and held that a carrier has the right to settle covered claims without the participation of the insured.

American Western Door involved a putative class action that an insured filed against its CGL carrier on behalf of a purported class of builders, contractors or subcontractors. The class action complaint alleged, inter alia, that the carrier had a practice of not hiring counsel for its insureds in connection with discharging its duty to defend, but instead had claims adjusters negotiate excessive settlements in an effort to exhaust policy limits. The insured alleged that this practice was designed to terminate the duty to defend because monies spent by the insurer defending its insureds under the CGL policies did not reduce policy limits. Based on the foregoing, the insured alleged that the insurer breached its duties to its insureds by failing to appoint counsel and in settling claims without the insureds’ consent. The insurer moved to dismiss the lawsuit and the District Court granted the motion. In rejecting the insured’s argument that the carrier breached its duty to defend, the Court found that the carrier was within the its rights to settle claims without the insured’s consent and prior to appointing counsel since the policies at issue specifically provided that the carrier “may at [its] discretion investigate any occurrence and settle any claim or suit that may result.” (Emphasis added by District Court).

Am. W. Door & Trim v. Arch Specialty Ins. Co., 2015 U.S. Dist. LEXIS 34589 (C.D. Cal. Mar. 18, 2015), [subscribers can access an enhanced version of this opinion: | Lexis Advance].

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