A federal court in Michigan recently found coverage under an excess insurance policy for settlements that the insured had entered into without obtaining the insurer’s consent.  Stryker Corp. v. XL Ins. Co.No. 05-CV-51 (W.D. Mich. Oct. 30, 2014).  Stryker had received a number of direct product liability claims regarding defective Uni-Knees.   It’s primary insurer, XL, denied coverage under a CGL policy for these direct claims, and Stryker proceeded to settle such claims on its own in the amount of $7.6 million.  In a separate coverage action, the court determined XL was liable for the direct settlements.  However, Stryker also had been sued by Pfizer for indemnification for Uni-Knee claims and ultimately was found liable to indemnify Pfizer.  XL ended up paying it full policy limits to Pfizer to resolve those indemnity claims.  Given exhaustion of the XL policy, Stryker sought coverage for the $7.6 million in direct settlements from its excess insurers, TIG.  There was no dispute as to the reasonableness of the settlements; however, TIG refused to pay on the grounds that Stryker did not obtain its consent before entering into the settlements.  The excess policy’s definition of “Ultimate Net Loss” included settlements made with the insurer’s written consent.  On cross motions for summary judgment, the court, applying Michigan law, ruled in favor of coverage for Stryker.  The court reasoned that there was a latent ambiguity in the policy language as to whether the consent provision applied to all settlements or only to those settlements within TIG’s policy layer.  Here, the direct settlements had been entered into before the primary layer of coverage had been exhausted, and the primary layer was later exhausted by other claims.  The court construed the ambiguity in these circumstances against excess insurer and in favor of coverage.   The court also reasoned that requiring Stryker to obtain TIG’s consent before the XL policy was exhausted would have been a meaningless act, would not have met the purpose of the consent provision, would have granted a windfall to TIG, and in any case TIG had no good faith basis for withholding consent.