By Alan Jampol, Esq. of Jampol Zimet LLP Consent To Settlement In February, the California Court of Appeal ruled in Doe Run Resources Corp v. Fidelity & Casualty Co. of New York (2016) WL 379839, that an excess insurer did not have to contribute to a settlement where the insured failed to obtain the excess insureraEUR(TM)s consent before signing the settlement agreement. In 2001, residents of Herculaneum, Missouri filed a complaint against Doe Run Resources Corp. alleging that its lead and cadmium smelting operations caused environmental damages. Doe RunaEUR(TM)s primary insurer, Zurich Insurance Co., defended Doe Run under a reservation of rights; excess insurer Fidelity & Casualty Co. of New York had no obligation under its excess policy to join in the defense of Doe Run and did not do so. In the course of litigation, Doe RunaEUR(TM)s attorneys notified Fidelity of a scheduled mediation, but did not invite Fidelity to attend the mediation and did not indicate the place of mediation. During mediation, the parties reached a settlement for $55 million; Fidelity was not informed of the settlement until a month after the agreement was reached, when Fidelity asked for a case update. Following the settlement, Doe Run sued Zurich in California (where Doe RunaEUR(TM)s corporate successor was located) for indemnity in excess of the primary policy and named Fidelity as a co-defendant for failure to pay the excess portion of the judgment under the excess policy. Fidelity moved for summary judgment on the ground that it was undisputed that Doe Run failed to obtain FidelityaEUR(TM)s written consent to the settlement as required per the terms of the excess policy (which consent, the court pointed out, was part of the insuring provisions, not an exclusion). The trial judge granted FidelityaEUR(TM)s motion, and Doe Run appealed. Doe Run contended that FidelityaEUR(TM)s consent to the settlement was not required, because Fidelity had no obligation until the primary insurance was exhausted, which did not occur until the settlement. Doe Run asserted that that Fidelity chose not to attend the mediation, which it could have done. It also asserted that Fidelity should have been proactive, affirmatively keeping track of settlement and attending the mediation (simply asking Doe RunaEUR(TM)s counsel for the time and place of the mediation). The Court of Appeal applied Missouri law to the coverage dispute, finding that the Missouri Supreme CourtaEUR(TM)s decision in Johnston v. Sweaney (2002) 68 S.W. 3^rd was controlling. Johnston held that a policyholder who settles without first seeking consent of the insurer forfeits coverage because by entering into a settlement without the insureraEUR(TM)s consent, the insurer is foreclosed aEURoefrom the aEUR~opportunityaEUR(TM) of disputing the amount of the damages.aEUR? The California court further held that the letter sent to Fidelity notifying it of the mediation was insufficient warning to Fidelity that it might need to approve a settlement, because the letter offered aEURoeno estimate of the probabilities of settlementaEUR? and failed to provide the location of the mediation. The court found that under the precise circumstances here, Doe RunaEUR(TM)s argument that Fidelity could and should have been proactive and attended the mediation anyway was unwarranted. However, this finding leaves open the possibility that Doe Run might have been justified in settling without consent if it was given more information about the mediation or if it showed that the settlement resulted from an unexpected development that required Doe Run to act quickly. This was a case decided under Missouri law, but there was no mention by the court that California is any different. Assuming that a California court would decide the same way the court concluded that the Missouri court would decide the case, it emphasizes the benefit to, and perhaps the obligation of, excess insurers to affirmatively keep track of settlement issues and to be prepared, at mediations and otherwise, to appear and become involved in negotiations aEUR" even if it appears unlikely that a settlement will penetrate the excess layer. It is entirely possible that had the insured been more careful or the circumstances been somewhat different, the courtaEUR(TM)s decision would have been different. If you are an excess insurer that has a question as to the scope of your duty and would like to review your practices to determine your obligations under an excess policy, please contact Alan Jampol at ajampol@jzlaw.com or Marc Zimet at mzimet@jzlaw.com or call (213) 689-8500