If I am sued, can my insurance company settle the case without my consent?

Under most types of liability insurance, the insurance company has the contractual right to settle or defend the case as it sees fit. You normally will have an opportunity to provide input, but the company typically has no obligation to get your consent or approval. A common exception to this involves professional liability policies, such as medical malpractice or architects errors and omissions coverage, under which consent of the insured usually is required for any settlement.

In cases where some claims are covered and others are not, the insurer can settle only the covered claims. If the insurer does this, its duty to defend you terminates. It will no longer pay for the lawyer that it appointed for you. Similarly, if the plaintiff is claiming damages that exceed the limits of your policy, the insurer can pay the policy limits to the plaintiff and terminate its defense. In either case, you will either have to pay the lawyer the insurance company appointed for you to continue representing you or find your own lawyer.

Case Studies: Insurance Company Settlements Without Consent

Case Study 1: Medical Malpractice Coverage

A doctor is sued for alleged medical malpractice. The doctor holds a professional liability policy that requires their consent for any settlement. However, the insurance company decides to settle the case without seeking the doctor’s approval. This action leads to a termination of the insurer’s duty to defend the doctor, leaving them responsible for finding their own legal representation.

Case Study 2: Mixed Coverage

An individual faces a lawsuit that involves both covered and uncovered claims under their liability insurance policy. The insurer has the right to settle the covered claims without the insured’s consent. However, if they choose to do so, the insurer’s duty to defend the insured ends. Consequently, the insured must either hire their own attorney or continue paying for the lawyer appointed by the insurance company.

Case Study 3: Policy Limits

The plaintiff’s claim exceeds the limits of the insured’s liability policy. The insurer has the option to pay the policy limits to the plaintiff and terminate its defense. As a result, the insured is left to either continue with the attorney appointed by the insurer at their own expense or find alternative legal representation.