A Louisiana Court of Appeal affirmed summary judgment in favor of insurers concluding that the insurers had not waived their right to invoke the policies’ notice and “consent-to-settle” conditions when they denied coverage because the party seeking coverage settled the underlying claims without the insurers’ consent before giving notice. Ortiz v. MeadWestvaco Corp., 2019 La. App. LEXIS 1045 (La.App. 3 Cir. 06/05/19).
The insured contracted with the defendant to perform welding work at the defendant’s refinery, and the insured’s employees sued the defendant for personal injuries arising out of the performance of this work. The defendant settled the suits and then filed third-party demands against the insured and its insurers seeking indemnity and coverage. The insurers moved for summary judgment arguing, among other things, that even if the defendant were an insured, its failure to comply with the policies’ notice and “consent-to-settle” conditions precluded coverage. The court rendered judgment in the insurers' favor, finding that the defendant did not give notice to the insurers until it filed its third-party demand against them years after the underlying occurrence and after the defendant had settled the underlying suits. The defendant appealed on the basis that the insurers waived their right to invoke the notice and “consent-to-settle” conditions as defenses when they denied coverage and because neither insurer provided evidence of prejudice.
The court of appeal affirmed. It rejected the argument that an insurer’s denial of coverage necessarily waives its right to rely on an insured’s non-compliance with the “consent-to-settle” condition as a defense. The court found mistaken the reliance on caselaw where the insurer waived its “consent-to-settle” defense by denying coverage before the insured settled without the insurer’s consent. Unlike the settlements in the caselaw relied upon by the defendant, the settlement preceded the insurers’ coverage denial; therefore, the court held that the defendant could not argue that it was forced to settle without the insurers’ consent to minimize its losses and that enforcement of the “no-action” provision would be inequitable.