The U.S. Eleventh Circuit Court of Appeals recently certified a question to the Georgia Supreme Court after finding that Georgia law did not clearly establish whether an excess insurer “unreasonably withheld” its consent to settle an underlying liability claim between its insured and the claimants after a Georgia court approved the settlement. Piedmont Office Realty Trust, Inc. v. XL Specialty Ins. Co., 769 F.2d 1291 (11th Cir. 2014).

The insured had a primary and an excess liability policy. The excess insurer agreed to contribute $1 million toward a settlement of a securities fraud complaint. However, without obtaining the excess insurer’s consent, the insured and the claimant settled the dispute for the full primary policy limit and the amount remaining under the excess policy limit. A court order confirmed the settlement. The insured sought settlement funds from the excess insurer, but the excess insurer asserted that it was not obligated to pay because it did not consent to the settlement. The insured sued the excess insurer for breach of contract and the excess insurer moved to dismiss. The district court dismissed the lawsuit and held that the insured’s unilateral agreement to, and voluntary payment of, the settlement precluded coverage because the policy provisions required the excess insurer’s consent to settle a securities fraud action. The insured appealed, arguing that the excess insurer “unreasonably withheld” its consent to the settlement in violation of the express terms of the excess policy.

Finding that Georgia law does not clearly establish whether the excess insurer “unreasonably withholds” its consent to a settlement that has been subsequently approved by the court, the Eleventh Circuit certified the question to the Georgia Supreme Court. The Eleventh Circuit reasoned that, while settled Georgia law establishes that an excess insurer may enforce a policy’s “consent-to-settle” provision when a settling insured fails to first obtain the excess insurer’s consent before settling an underlying liability claim, no Georgia court has addressed the effect of either a subsequent court order confirming the settlement or policy language providing that an excess insurer may not “unreasonably withhold” its consent to an underlying settlement.