December 16, 2019 — BOSTON — The Boston Bar Association (BBA) praised the Massachusetts Supreme Judicial Court (SJC), for its ruling today in Rawan v. Continental Casualty Company (SJC-12691), upholding the right of professionals and insurance companies to enter into liability policies that include so-called “consent to settle” provisions. The BBA had filed an amicus brief in the case, arguing for exactly this outcome, on the basis of the value of such provisions.
Consent-to-settle provisions require the insurer to obtain the insured’s consent before settling a claim. In Rawan, the SJC took up the question whether an insurance company must honor such clauses, even when the liability of the policy-holder is reasonably clear – and whether they ought to be unenforceable altogether, as against public policy.
In order to ensure that the Court considered what is at stake here for the practice of law, the BBA’s brief– authored by Maureen Mulligan, Allen David, and Steven E. DiCairano of Peabody & Arnold, LLP–offered the perspective of attorneys, for whom such policies are common, pointing out that they benefit the profession as well as clients by encouraging attorneys to obtain liability coverage and to fashion policies to suit their needs.
The brief noted that consent-to-settle provisions not only “enable lawyers to exercise their professional discretion in striking the appropriate balance among a host of unique, individualized considerations presented by malpractice claims” but also encourage lawyers to obtain what is, at least in Massachusetts, optional liability insurance.
These arguments are echoed in today’s decision, in which Justice Scott Kafker, speaking for a unanimous bench, wrote:
[C]onsent-to-settle clauses encourage professionals to purchase this voluntary line of insurance, thereby providing more secure funding for the payment of third-party claims … and deeper pockets to compensate those injured by the insured.
In hailing the decision, Erin Higgins of Conn Kavanaugh LLP, co-chair of the BBA’s Amicus Committee, pointed out that it does not give insurers carte blanche to ignore their responsibility to perform an adequate investigation and advise the insured of the results of that investigation. “The Court clearly expressed that, while consent-to-settle clauses are enforceable, insurers nevertheless have a residual obligation relating to their duty to properly investigate claims, and to then make well-informed recommendations to policy-holders as to reasonable settlements,” she said.
Her Committee co-chair, Neil Austin of Foley Hoag LLP, added, “This is a good ruling for attorneys and clients alike. As professionals, we are especially susceptible to the adverse reputational effect of a malpractice claim, so it is appropriate to allow us to seek out insurance policies that offer some measure of control over the handling of such a claim. And that, as the Court stated, will offer greater protection to clients by encouraging attorneys to obtain coverage.”
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