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Posted: August 9, 2017

Insured Not Entitled to Indemnification Because It Settled Claims Without Insurer’s Permission

On August 8, 2017, the First Department issued a decision in Bovis Lend Lease (LMB), Inc. v. Arch Insurance Co., 2017 NY Slip Op. 06049, holding that an insured forfeited its right to indemnification by entering into a settlement without its insurer’s permission, explaining:

Under paragraph 4 of the parties’ Companion Agreement, Bovis was required to obtain Arch’s consent to the settlement of the claims and counterclaims asserted by and against Bovis and Lower Manhattan Development Corporation (LMDC), in order to seek indemnification from Arch. Bovis’s contractual remedy in the event of Arch’s refusal to consent to a settlement, whether or not such refusal was reasonable, was to be indemnified by Arch “for all damages suffered in excess of the result that [Bovis] would have obtained if the settlement had been accepted.” By entering, contrary to the plain terms of the Companion Agreement, into a settlement with LMDC to which Arch had refused to consent, Bovis breached the Companion Agreement and forfeited its right to the contractual remedy for Arch’s refusal to consent to a settlement acceptable to Bovis, whether or not Arch withheld its consent in good faith. Accordingly, Arch is entitled to summary judgment dismissing Bovis’s third-party claim against it.

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