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Policy Library

Rawan v. Continental Casualty Company [SJC 12691]

August 01, 2019

The SJC accepted our argument that an insurance company must honor a so-called “consent to settle” clause that is included in certain professional-liability policies, granting the insured the right to refuse any settlement offer the insurer proposes, even when liability is reasonably clear.

Under L. G. c. 176D, §3(9)(f), it is considered an unfair claim settlement practice for a liability insurer to fail to effectuate prompt, fair and equitable settlements of claims in which liability has become reasonably clear. Here, an engineer gave only limited authority to his insurance company to make settlements, pursuant to a “consent to settle” clause in his policy. After prevailing at trial, the plaintiffs pursued a claim against the insurer under Chapter 176D, arguing that the insurer had violated its statutory obligation to act reasonably and in good faith to pursue a settlement, once its client’s liability had become clear. However, while noting that they do not absolve an insurer of its duty to investigate and make recommendations to its insured, the Court declined to find such clauses unenforceable as against public policy.