{"id":899178,"date":"2021-09-28T14:55:31","date_gmt":"2021-09-28T20:55:31","guid":{"rendered":"https:\/\/www.myconstructionexpert.com\/blog\/?p=899178"},"modified":"2021-09-28T14:55:32","modified_gmt":"2021-09-28T20:55:32","slug":"appreciable-prejudice-consent-to-settle","status":"publish","type":"post","link":"https:\/\/www.myconstructionexpert.com\/blog\/appreciable-prejudice-consent-to-settle\/","title":{"rendered":"No Showing of \u201cAppreciable Prejudice\u201d Required Because Insured Violated Consent to Settle Provision"},"content":{"rendered":"\n<p>Elizabeth Fisher | <a href=\"https:\/\/www.executivesummaryblog.com\/no-showing-of-appreciable-prejudice-required-because\" target=\"_blank\" rel=\"noreferrer noopener nofollow\">Wiley Rein<\/a><\/p>\n\n\n\n<p>The United States Court of Appeals for the Third Circuit, applying New Jersey law, has held that an insurer can deny coverage under a <a href=\"https:\/\/www.myconstructionexpert.com\/blog\/traps-await-unwary-claims-made-insurance-policies\/\" target=\"_blank\" rel=\"noreferrer noopener\">claims-made policy<\/a>, without demonstrating \u201cappreciable prejudice,\u201d if the insured fails to comply with a clear condition precedent to coverage requiring the insurer\u2019s written consent before agreeing to settle a claim.\u00a0\u00a0<em>Benecard Servs., Inc. v. Allied World Specialty Ins.<\/em>, 2021 WL 4077047 (3d Cir. Sept. 8, 2017).\u00a0 The court also held that several exclusions barred coverage and that the insured could not maintain a bad faith claim against the insurers unless it established coverage in the first instance.<\/p>\n\n\n\n<p>The policyholder, a company that managed prescription drug benefit plans, was sued for, among other things, breach of contract and fraudulent misrepresentation.&nbsp; The parties settled the lawsuit.&nbsp; The policyholder had an insurance program including both claims-made E&amp;O and D&amp;O coverage.&nbsp; Up until the settlement, the E&amp;O insurer had advanced defense costs, but it denied indemnity coverage based on the insured\u2019s failure to obtain its consent prior to settling.&nbsp; The D&amp;O insurers denied coverage based on policy exclusions. &nbsp;In the ensuing coverage action, the United States District Court for the District of New Jersey granted summary judgment in favor of the insurers.&nbsp;<\/p>\n\n\n\n<p>The Third Circuit affirmed.&nbsp; As to the E&amp;O policy, the court explained that it unambiguously required that the insured obtain the insurer\u2019s consent to settle.&nbsp; The court further noted that the insurer need not demonstrate \u201cappreciable prejudice\u201d under New Jersey law to deny coverage based on failure to comply with the consent provision under claims-made policies with such a requirement.&nbsp; In doing so, the court rejected the insured\u2019s arguments that its noncompliance was excused because it believed that defense costs had exhausted the policy limits and that the insurer violated its duty of good faith and fair dealing because it failed to remind the insured of the consent clause when it knew the insured was considering settlement.<\/p>\n\n\n\n<p>The appellate court also held that the district court correctly determined that exclusions in the D&amp;O policies barred coverage.&nbsp; First, the appellate court addressed \u201cThird Party\u201d and \u201cProfessional Services\u201d exclusions, holding that, despite some overlap between the exclusions, each unambiguously barred coverage for the lawsuit.&nbsp; Second, the court held that a \u201cManaged Care Activities\u201d exclusion, which applied to \u201cany actual or alleged act, error or omission in the performance of .&nbsp;.&nbsp;. Managed Care Activities\u201d precluded coverage because the term \u201cact\u201d was broad enough to encompass misstatements or misrepresentations as well as poor or non-performance in the policyholder\u2019s management of prescription drug plans.<\/p>\n\n\n\n<p>Finally, the court held that a policyholder could not maintain a bad faith claim against an insurer unless it could first establish as a matter of law a right to summary judgment on the substantive coverage claim or that its claim for coverage was valid and uncontested, which the court noted were \u201cessentially the same\u201d test.&nbsp; Because the insured had not established coverage, it could not pursue its bad faith claim.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Elizabeth Fisher | Wiley Rein The United States Court of Appeals for the Third Circuit, applying New Jersey law, has held that an insurer can deny coverage under a claims-made policy, without demonstrating \u201cappreciable prejudice,\u201d if the insured fails to comply with a clear condition precedent to coverage requiring the insurer\u2019s written consent before agreeing&hellip; <a class=\"more-link\" href=\"https:\/\/www.myconstructionexpert.com\/blog\/appreciable-prejudice-consent-to-settle\/\">Continue reading <span class=\"screen-reader-text\">No Showing of \u201cAppreciable Prejudice\u201d Required Because Insured Violated Consent to Settle Provision<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false},"version":2}},"categories":[10721],"tags":[9895,11542,9889,11543],"class_list":["post-899178","post","type-post","status-publish","format-standard","hentry","category-insurance","tag-advise-consult","tag-appreciable-prejudice","tag-claims-made-insurance-coverage","tag-consent-to-settle-provision","entry"],"jetpack_publicize_connections":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v25.0 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>No Showing of \u201cAppreciable Prejudice\u201d Required Because Insured Violated Consent to Settle Provision - Advise &amp; 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