Senior Communications Manager
Laura Foggan Discusses Colorado Supreme Court Insurance Ruling on No Voluntary Payments
Laura A. Foggan, chair of Wiley Rein’s Insurance Appellate Group, was quoted in an article published yesterday in Law360 about the Colorado Supreme Court’s ruling that denies coverage to policyholders that settle pre-suit claims without an insurer’s permission even if they show the carrier was not prejudiced. The 4-3 decision enforced the insurance contract’s no-voluntary-payments clause.
Although policyholder advocates argued that the decision might encourage insureds to litigate claims in instances where insurers decline to authorize policyholders’ settlements, Ms. Foggan disagreed. Ms. Foggan—who represents the Complex Insurance Claims Litigation Association, which appeared as amicus curiae in the case—said the court’s ruling will help protect insurance carriers from the risk that policyholders and third-party claimants will join together to negotiate unreasonable settlements that can be passed along to insurers.
“If there are no protections for insurers, there will be a breakdown of how the insurance system is supposed to work,” Ms. Foggan said. “An insurer shouldn’t be on the hook for these types of voluntary arrangements where a policyholder elects to pay for business good will or other reasons. These are choices that the policyholder makes and should have to pay for on their own.”
Ms. Foggan said this decision is a win for insurers, because it highlights the importance of enforcing no-voluntary-payments provisions on their plain terms.
“The Colorado Supreme Court appears to be cognizant of the risk of collusion or fraud if a policyholder stipulates to a settlement without any involvement of the insurer,” she said. “That is why it is important for insurance contracts to be enforced as written.”
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