Pennsylvania High Court Expands Circumstances Under Which Insureds May Settle Underlying Claims Without Insurer Consent

Liability policies often contain a “cooperation clause” pursuant to which an insurer who has agreed to defend an insured from an underlying lawsuit purports to have the right to approve any settlement to be entered into by the insured. A recent decision by the Pennsylvania Supreme Court, however, has expanded the circumstances under which an insured may settle underlying claims without insurer consent in situations where the insurer has reserved its rights and refuses to consent to a non-collusive, objectively reasonable settlement under policy limits.