How often does a plaintiff have an opportunity to collaborate with an insured defendant to pressure the defendant’s insurance company into settlement? What are the elements necessary to support an agreement to settle for the policy limits without the insurer’s consent? More critically, is there a strategy that would allow the plaintiff and defendant to agree to settle for more than the policy limits, to limit collection against the insurer only, and to provide the defendant with a full release and covenant not to execute? In certain circumstances, the answer to that last question is “yes,” provided the parties overcome several obstacles.
A standard provision in liability insurance contracts gives the insurer control over the defense of any claim against the insured, and an implied correlative of this right is the duty not to gamble with the insured’s money by forgoing reasonable opportunities to settle a claim on terms that will protect the insured against an excess judgment.