Consent to Settle Clauses in Automobile Insurance and Liability

December 18th, 2013 by Rieders Travis in Car Accidents

Learn about the Consent to Settle Clauses in Automobile Insurance and Liability

An insurance company cannot withhold its consent to a settlement unreasonably. It can, however, withhold its consent in good faith while it determines what will be paid in a lawsuit against others who also caused the insured’s loss. An insurance company can also protect its right to subrogation by withholding its consent. Courts will enforce a consent-to-settle clause to safeguard the subrogation rights of an insurance company.

An insured’s failure to obtain his or her insurance company’s consent to a settlement could result in a loss of coverage under the policy. While such a failure is a breach of the consent-to-settle clause, some courts require that the insurance company prove that the breach prejudiced its rights.

An insurance company can choose to waive the terms of the consent-to-settle clause. And a waiver could result if an insurance company fails to participate in negotiations to settle a claim. Of course, if an insurance company denies a claim, that denial operates as a waiver of the consent-to-settle clause.

Where the insured settles with a tortfeasor without the insurer’s consent, the insurer must demonstrate prejudice before it can invoke a “consent to settle clause”. Cerankowski v. State Farm Mut. Auto Ins., 783 A.2d 343 (Pa. Super. 2001). In that case, insured, injured in automobile accident, settled her lawsuit against the manufacturer of the surgical equipment used to treat her. Her insurance company refused to pay the UIM claim on the basis that she had violated the consent to settle clause. See also Nationwide Mut. Ins. Co., v. Lehman, 743 A.2d 933 (Pa. Super. 1999). Insurance carrier was not prejudiced when it withheld consent and did not pursue evaluation of tortfeasor’s assets.

Insurer’s use of “consent to settle” clause cannot deprive insured of benefits for which insured paid. Daley-Sand v. West American Ins. Co., 564 A.2d 965 (Pa. Super. 1989). Insured, who had UIM coverage with insurer, requested insurer consent to settle claim against other driver. Insurer, who had paid nothing, refused to sign consent to settle due to ongoing investigation. Insurer would not provide UIM benefits if insured settled with driver without insurer’s consent. Court held the clause was against public policy.

Attorney Cliff Rieders

Attorney Cliff RiedersCliff Rieders is a Nationally Board Certified Trial Lawyer practicing personal injury law. A large part of his practice involves multi-district litigation, including cases related to pharmaceuticals, vitamin supplements and medical devices. He is admitted in several state and federal courts, as well as the Supreme Court of the United States. Rieders is the past regional president of the Federal Bar Association and is a life member of the distinguished American Law Institute, which promulgates proposed rules adopted by many state courts. He is a past president of the Pennsylvania Association for Justice, formerly Pennsylvania Trial Lawyers Association. As a founder of the Pennsylvania Patient Safety Authority, he served on the Board for 15 years.

Not only has Rieders held many highly esteemed, leadership positions, he authored legislation related to the Patient Safety Authority and the Mcare Act, which governs medical and hospital liability actions in Pennsylvania. He authored texts upon which both practitioners and judges rely, including Pennsylvania Malpractice Laws and Forms, and Financial Responsibility Law Issues in Pennsylvania, the latter governing auto and truck collisions in Pennsylvania. In addition, he wrote several books on the practice of law in Pennsylvania regarding wrongful death and survivor actions, insurance bad faith, legal malpractice claims and worker rights, among others. Rieders also serves as a resource to practitioners as a regular speaker for Celesq, an arm of the world’s largest legal publisher, Thomson Reuters West Publishing.

As recognition of his wide range of contribution to his profession and of his dedication to protecting the rights of his clients, he received numerous awards, among them the George F. Douglas Amicus Curiae Award, the Milton D. Rosenberg Award, the B’nai B’rith Justice Award, and awards of recognition from the Pennsylvania Trial Lawyers. [ Attorney Bio ]

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