A “consent to settle” clause generally states that a carrier must not settle a claim without receiving the consent of the insured, which consent shall not be unreasonably withheld. There are policies that may even provide a “mutual consent to counsel” endorsement, granting the insured to have a say in who the carrier selects to defend the claim.
The Consent To Settle Clause
Many law suits fall under the auspices of liability or E&O claims and including Consent to Settle. This situation takes place whereby lawsuits may occur when there are disagreements in the construction industry, for instance. This is a scenario in which an insured engineer or architect is punished for not consenting to settle the dispute.
Coverage for this is associated with errors and omissions, executive liability, professional liability and executive liability cover. It is designed to coerce the policy to agree with the insurance carriers wish to have a claim settled.
There is a slight anomaly in this clause as it is to the advantage of the insured. Only part of the clause has the penalty for the insured not consenting. This clause makes provision for forcing the policy holder to consent. Certain of the forms contain language appropriate to this clause.
The insurer has the sole right to settle a claim in the case of CGL (commercial general liability) policies. This prohibits the policyholder from disallowing or opposing a settlement. Because of CGL, the carriers right must be reasonable. It will not often happen that personal and advertising injury, property damage or bodily injury spoils the policyholders reputation.
There is a situation of trust because of information and training within the legal/professional guidelines. If this is violated or transgressed, there could be loss incurred by a third party that is not covered by CGL. If charges are made against the insured in the event of him violating this trust, the reputation can be tarnished. This would confirm that the insured operates business in a way unbecoming of his or her profession.
The insured has the right to object to the Consent to Settle clause. However, in the case that of losing the judgment, the penalty can be rather hefty.