SJC Supports ‘Consent-to-Settle’ Insurance Clauses, in Keeping with BBA Amicus Brief

On December 16, 2019, the SJC announced its decision in Rawan v. Continental Casualty Company, a case that addressed whether an insurance company must honor a so-called “consent-to-settle” clause, granting the insured the right to refuse any settlement offer the insurer proposes, even when liability is reasonably clear—and whether such clauses ought to be unenforceable altogether, as against public policy. The BBA was pleased to see that the SJC accepted our argument that an insurance company must honor these clauses. (You can read our full statement on the ruling here.)

The BBA filed an amicus brief in support of the Defendant-Appellee Continental Casualty Company on the questions posed by the SJC in their request for amici briefs, “whether a liability insurer violated its duty, under G. L. c. 176D, § 3(9)(f), to effectuate a prompt, fair, and equitable settlement of a claim in which liability had become reasonably clear, where the insured refused to consent to a settlement and the insurance policy provided that the insurer would not settle any claim without the informed consent of the insured; whether such a provision is unenforceable as against public policy.”

The BBA brief, as drafted by Maureen Mulligan, Allen David, and Steven E. DiCairano of Peabody and Arnold, argued that:

“Consent-to-settle provisions promote public policy in two distinct ways. First, consent provisions enable lawyers to exercise their professional discretion in striking the appropriate balance among a host of unique, individualized considerations presented by malpractice claims. Second, consistent with the unique implications of such suits, well-established freedom to contract principles protect professionals’ abilities to tailor the terms of their liability insurance coverage.

Consent provisions ultimately incentivize the procurement of optional professional liability insurance in Massachusetts because they enable professionals to enjoy insurance protections while preserving autonomy in controlling the resolution of a malpractice suit. To invalidate consent provisions within the Chapter 176D context or otherwise would be to divest professionals of an important malpractice claim management device which insures to the benefit of the insured, not the insurer.”

It goes on to note that, like certain other professionals, attorneys are especially susceptible to the adverse reputational effect of a malpractice claim, and may thus choose to seek out insurance policies that grant them some measure of control over the handling of such a claim, “consistent with their individualized calculus”—especially since word of a settlement may only invite more additional claims.

Echoing that view, Justice Scott Kafker, writing for a unanimous SJC, asserted that:

“Consent-to-settle clauses also serve valuable purposes in the professional liability context, including the important protection of a professional’s reputation and good will. Moreover, consent-to-settle clauses encourage professionals to purchase this voluntary line of insurance, thereby providing more secure funding for the payment of third-party claims.

Consent-to-settle clauses serve important purposes in this optional line of insurance. Most importantly, they encourage professionals to purchase such insurance, thereby providing coverage for the insured and deeper pockets to compensate those injured by the insured.”

We were pleased to see that the Court upheld the right of professionals and insurance companies to enter into liability policies that include “consent to settle” provisions, the exact outcome that our brief argued for. We are thankful to the brief drafters as well as the entire BBA Amicus Committee—co-chaired by Erin Higgins of Conn Kavanaugh LLP and Neil Austin of Foley Hoag LLP—for their work in this case.

-Lucia Caballero
Government Relations and Executive Assistant
Boston Bar Association